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Must-know: An analysis of Verizon’s growth areas

Puneet Sikka

Must-know: Why 4G adoption and FiOS are driving Verizon's growth (Part 12 of 12)

(Continued from Part 11)

Smartphone penetration for Verizon increasing at a fast rate

Smartphones have always been important devices for Verizon (VZ), as users tend to use more data for Internet surfing, downloading apps, or simply watching videos. As the below chart shows, smartphone penetration at Verizon has consistently increased from 64% in the second quarter of 2013 (or 2Q13) to 75% in 2Q14. Out of these smartphones, 69% of them are on Verizon’s faster and more efficient 4G network. This means that Verizon still has about 20 million 3G smartphones and 22 million basic phones on its network. This gives Verizon an opportunity to upgrade these phones onto the 4G network.

Improved 4G network quality benefiting Verizon

Verizon has improved its network quality. Its 4G LTE network is now considered the best network across the U.S. According to a report from RootScore, Verizon has the best network performance, followed by AT&T (T), T-Mobile (TMUS), and Sprint (S).

Better network quality helps Verizon enable users to use more data from their smartphones and tablets. Speaking of tablets, these devices are becoming the next growth area for Verizon. Tablets help Verizon by increasing data consumption, lowering churn, and lowering subsidy costs when compared with smartphones.

Innovative plans also attracting more customers

In the last one year or so, Verizon has introduced innovative plans such as Edge and More Everything. Edge is an installment plan for customers who want to upgrade their devices faster or who don’t want to pay the up-front cost of their devices. More Everything is a data plan for families who have multiple devices. This plan helps you save money, as the data can be shared on up to ten devices. Plus, you get a $10 to $25 discount if you are an existing Edge customer and also depending on the data allowance. These plans are attracting more customers on Verizon’s network.

Apple’s iPhone 6 success would be crucial to Verizon

Looking at the future, Apple (AAPL) expects to launch its iPhone 6 next month. A quality smartphone lineup is important for Verizon, but the success of this new iPhone becomes more important. iPhone users tend to be heavy data users, which benefits Verizon. Plus, according to Apple, iPhone buyers tend to opt for installment plans such as the Edge program. iPhone 6′s success would also help Verizon increase the adoption of the Edge program.

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