Android vs. Blackberry, Does Verizon Gain on Android Sales?
Verizon (NYSE:VZ), which competes primarily with AT&T (NYSE:T) and Sprint (NYSE:S) in the mobile business, has seen a surge in Android based phone sales over the past few quarters. According to data from ITG Investment Research, Verizon’s dependence is clearly shifting from Blackberry to Android based phones. [1]
While we believe that additional revenue opportunities from Android phones are available and less reliance on any one manufacturer benefits Verizon, recent reports suggest that Android sales so far come at the expense of Blackberry’s and so the data revenue impact from Android sales is limited for the time being.
We have a current Trefis price estimate of $31.69 for Verizon, which is around 8% below the current market price.
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Initial Impact is Limited
While the share of Android-based phones among smartphones sold by Verizon is rising, it mainly results due to the replacement of Blackberry smartphones. In 2009, Blackberry accounted for more than 80% of Verizon’s smartphone sales. [1] However according to data for November 2010 sales, Blackberry’s share is just under 20%. [1]
Blackberry users tend to generate the highest levels of ARPU (average monthly revenue per user) and so the benefit of Android subscribers replacing existing Blackberry accounts is muted. According to research firm Validas, Blackberry users tend to spend around $95 per month, [2] which is higher than the ARPU for iPhone users that we estimate is around $90 a month on average. We discussed the iPhone’s impact to Verizon’s data revenues in an article last week. (See iPhone Will Accelerate Verizon’s Data Revenue Growth) [3]
So for now, the revenue gains from the Blackberry to Android shift appear limited, but this could change over time. In particular, Android is well ahead of the Blackberry’s app store with over 70,000 apps vs. RIM’s 10,000 or so. This could help user engagement and lift data revenues as smartphone usage increases. (See Surging Android Could Knock 10% Off RIM’s Stock) [4]
Below you can see how a faster growth in data revenues can benefit Verizon’s price estimate.
You can see the complete $31.69 Trefis price estimate for Verizon’s stock here.
Notes: