Verizon Higher Data Revenues From 4G Launch

November 25th, 2010 by Trefis Team
+5.06%
Upside
40.49
Market
42.54
Trefis
VZ: Verizon logo
VZ
Verizon

Verizon (NYSE:VZ) is likely to launch its 4G LTE network in December 2010. This initial launch will cover 38 major markets including Boston, New York, Chicago, Los Angeles, San Francisco, Seattle and Washington D.C. However by end of 2013, Verizon plans to extend its LTE network to all of its current 3G coverage.

Verizon has a competitive advantage in the sense that it is ahead of AT&T (NYSE:T) in terms of LTE deployment (early market entry advantage) and its LTE 4G technology will offer better download speed than Sprint’s (NYSE:S) WiMax 4G technology (technological advantage).

Additionally, LTE-based smartphones may be available in early 2011, and so Verizon should gain from higher growth in its data revenue per subscriber leading to potential upside of 5% to our price estimate.

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Mobile Data Traffic Rising

The demand for mobile data has seen a tremendous rise due to the success of smartphones. Newer devices like tablet computers, netbooks and notebooks are further expected to aid mobile data growth.

In the U.S., mobile data traffic has picked up since 2008 dramatically [1]. Studies suggest that average data revenue per user has doubled since the launch of Apple’s (NASDAQ:AAPL) iPhone [1]. Overall, the U.S. wireless data market grew by 25% in Q3 2010 compared to Q3 of 2009, amounting to $14 billion [1]. The rapid growth in this area is likely to continue and faster networks like 4G will support continued growth.

As a result Verizon’s data revenue per user can potentially increase more than we forecast. We currently forecast this figure to increase from an estimated $17.50 in 2010 to a little under $25.00 by the end of our forecast period. However if this figure rises to $30.00 instead, as a result of explosive data usage growth, our price estimate increases by 5%.

You can modify our forecasts above to see how data revenue per subscriber can impact Verizon’s stock.

You can see the complete $31.69 Trefis price estimate for Verizon’s stock here.

Notes:
  1. U.S. Mobile Data Traffic to Top 1 Exabyte [↩] [↩] [↩]