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Verizon Communications Inc. VZ is reportedly seeking permission from the Federal Communications Commission (“FCC”) to conduct new LTE equipment tests using Advanced Wireless Servies-3 spectrum (AWS-3) for Band 66. Band 66 is a radio frequency band used for mobile phones in the United States. Being one of the latest bands, it is used exclusively for 4G LTE technology. Band 66 is also known as AWS.
Verizon plans to conduct field tests from Mar 19-May 31, using Ericsson’s single-base station and LG’s mobile units, in a highly controlled environment, in Greenville, SC. LG’s mobile units will be operating within the coverage area of the base station in order to receive the intended broadcast signal.
Verizon along with its partners, is trying to develop equipment that are compatible with Band 66, using LTE technologies. As part of the trial, Verizon will check the signal transmission time and any service intrusion in an unclaimed frequency block — AWS-3 G-block within the 2155-2160 MHz band.
Notably, Verizon won 181 licenses in the AWS-3 auction covering 192 million POPs, or around 60% of the population in 2015. AT&T T and T-Mobile US TMUS also gained from the AWS-3 spectrum auction. The AWS-3 auction closed in January 2015 after registering a record-breaking bidding of $44.89 billion, breezing past the regulator’s initial estimate of a little over $10 billion.
Such trials have become very popular in the wireless industry in relation to the upcoming 5G technology. In December 2017, AT&T requested FCC to conduct 5G tests on the 3.5 GHz frequency band. T-Mobile US also requested for Special Temporary Authority from the FCC to test microwave radio spectrum bands in the range of 71-76 GHz and 81-86 GHz in two sites in Bellevue, WA.
Given this backdrop, we expect investor focus to remain on the outcome of the reported trial, which should enhance the telco’s wireless segment.
Verizon is strong on the back of wireless segment. In fourth-quarter 2017, the company reported a net increase of 1.174 million retail postpaid wireless subscribers. As of Dec 31, 2017, Verizon had 116.257 million retail subscribers, up 1.8% year over year. We believe the company’s unlimited data plans, attractive promotional plans, advertisements and lucrative discounts have paid-off in terms of the subscriber gain. Further, the company has been forging ahead with its 5G launch by conducting multiple 5G wireless network field trials. The telco plans to launch next-generation 5G wireless residential broadband services in three to five U.S. markets in 2018. The first commercial launch is scheduled in Sacramento, CA, in the second half of 2018.
Backed by such positives, Verizon has performed pretty well in the past six months. Shares of Verizon have moved up 3.7% outperforming the industry’s fall of 1.4%.
Zacks Rank & Key Pick
Verizon is a Zacks Rank #3 (Hold) stock.
Investors interested in the broader Computer and Technology sector can consider United States Cellular USM, currently carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The projected earnings growth rate (3-5 years) for United States Cellular is 1.00%.
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