Verizon (NYSE:VZ) is benefiting from popular new smartphones like the HTC Incredible, which it launched last quarter. Verizon, which competes with AT&T (NYSE:T) and Sprint (NYSE:S) in the telecom market, recently announced that it added 665,000 new postpaid retail subscribers on a net basis in the second quarter of 2010, up from 423,000 net new customers in the first quarter.
We expect Verizon’s wireless business to receive an additional boost from the July launch of the Motorola Droid X. Our analysis follows below.
Mobile share gains
Verizon’s mobile plans and phones business constitutes around 48% of the $34 Trefis price estimate for the company’s stock. We expect Verizon’s share of the retail postpaid market to grow from 31% in 2009 to 35.6% by the end of the Trefis forecast period. You can drag the trend-line in the chart below to create your own postpaid market share forecast for Verizon and see how it impacts the company’s stock price.
Verizon launched the HTC Incredible in the last quarter and Motorola’s Droid X on July 15th. Both smartphones have generated considerable positive buzz among consumers. In an earlier article we argued that Verizon must release popular new smartphones in order to gain market share.
According to management, 35% of Verizon’s retail postpaid base used smartphones or other multimedia devices by the end of the second quarter, up from just under 31% at the end of the first quarter and 26% at the end of 2009.
We see potential for additional market share gains, assuming that Verizon continues to release hot new smartphones. There could be an upside of 5% to the $34 Trefis price estimate for Verizon’s stock if its market share increases to 39% by 2016, rather than the 35.6% that we currently forecast.
Rising data revenues
Verizon’s average data fee per subscriber has grown rapidly in the past. Going forward, we expect average data fees to increase from around $15 in 2009 to $25 by the end of Trefis forecast period. In the next chart you can drag the trend-line to create your own average data fee per subscriber forecast for Verizon and see how it impacts the company’s estimated share value.
In the second quarter, about 40% of device sales from Verizon’s direct channel were smartphones with a $30 monthly data plan. As Verizon sells more smartphones, its data revenues per subscriber can be expected to rise.
There could be an upside of 3% to the $34 Trefis price estimate for Verizon’s stock if data revenues per subscriber reach $28 by 2016, instead of the $25 that we currently forecast.