Verizon Data Revenues to Rise on Higher Smartphone Penetration
Verizon’s (NYSE:VZ) average monthly SMS & Internet revenue per mobile subscriber has increased at an annual rate of 45% since 2005 led by fast-growing wireless data segment and wider adoption of improved mobile phone technologies like 3G and recently launched 4G. Verizon competes with Sprint Nextel (NYSE:S), AT&T (NYSE:T), Comcast (NASDAQ:CMCSA), and Time Warner Cable (NYSE:TWC) in the mobile plans market.
While we expect Verizon’s data ARPU to grow close to $25 per month by the end of our forecast period, Trefis members expect a slightly higher level of around $29, corresponding to an upside of 5% to our price estimate for VZ stock.
We currently have a Trefis price estimate of $31.69 for Verizon’s stock, about 11% below the current market price of $35.44.
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Wireless Data – A High Growth Rate Segment
There is ample scope for growth in the wireless data revenue industry. According to Goldman Sachs research, wireless data revenues are expected to nearly triple over the next two years, shooting up to $205 billion by the end of 2012. [1] The proliferation of high-end, data-intensive communication devices like smartphones, netbooks, e-book readers and smartbooks will result in higher data usage.
Growing Adoption of 3G/4G Technologies
Mobile data usage has sky rocketed in the last few years because of a marked improvement in both connection speeds and reliability. The rise of 4G wireless networks such as WiMAX and LTE will be major drivers for growth in wireless data usage. Verizon recently launched its 4G LTE network which will cover 38 major markets in the US and is expected to expand further in the coming years. Verizon has an early mover advantage with its 4G LTE, which promises to offer faster download speeds compared to Sprint’s WiMax 4G.
Member Forecast
The Trefis community forecasts that SMS & Internet revenue per Verizon mobile subscriber will increase from around $20 per month in 2010 to $30 by the end of the Trefis forecast period, compared to the baseline Trefis estimate of an increase from around $17 to almost $25 during the same period. The member estimates imply an upside of 5% to the Trefis price estimate for Verizon’s stock.
Our complete analysis for Verizon’s stock is here.
Notes:- Goldman Sachs expects tablet and wireless data market growth, Techworld.com, 22 Sept 2010 [↩]