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Why is the quality of the 4G network so important for Verizon?

Puneet Sikka

Analyzing Verizon's growth opportunities and important risks (Part 3 of 6)

(Continued from Part 2)

4G LTE network adoption continues to increase at Verizon

4G smartphone adoption and tablet growth is fueling increased data usage at Verizon. To cater to the ever-increasing demand for data on smartphones and tablets, Verizon introduced its More Everything plan in February this year, which provides users with more data, more storage options, and unlimited international messaging on its 4G LTE network at an attractive price point. Customers who opt for Verizon’s EDGE early upgrade plan are eligible for more discounts. The More Everything plan has gained popularity, such that by the end of Q1 2014, 50% of Verizon’s postpaid accounts were on this plan.

Network quality is equally important for Verizon

The iShares U.S. Telecommunications ETF (IYZ), iShares Global Telecom ETF (IXP), and Vanguard Telecommunication Services ETF (VOX) are some of the ETFs with high exposure to Verizon. In addition to coming out of with innovative plans, Verizon also needs to continually improve the quality of its network. As the chart above shows, and according to Root Metrics’ National RootScore Report issued in March, Verizon was the network performance leader in the rankings of wireless providers in the U.S. The overall performance index for Verizon was the highest, at 89.7, followed by 86.2 for AT&T (T), 68.2 for Sprint (S), and 64.3 for T-Mobile US (TMUS).

Verizon continues to invest in its network to drive 4G adoption

Verizon continues to invest heavily in building its 4G LTE coverage and adding capacity for its existing coverage. Its capex spending increased from $3.6 billion in Q1 2013 to $4.2 billion in Q1 2014, mainly through its wireless segment. 4G adoption is happening fast at Verizon. For example, in Q1 2014, more than 50% of smartphone upgrades were from 3G to 4G technology. Verizon had about 7.6 million smartphone activations during the quarter, out of which nearly 90% were on 4G.

Continue to Part 4

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