Verizon (NYSE:VZ) is expected to announce its Q3 earnings on October 21st. During the earnings, we will be keenly watching the uptake in subscriber number for Verizon as it continues to expand its LTE 4G network development, thereby challenging AT&T (NYSE:T) and Sprint (NYSE:S) in the wireless market. We will also look for its data revenue growth number, which is a direct beneficiary of increasing smartphone sales at Verizon.
Our $40.60 price estimate for Verizon stock is about 10% higher than the market price.
See our complete analysis for Verizon
Verizon’s network upgrade to LTE gaining new ground
Verizon launched the LTE service initially in Dec 2010 in about 38 markets which covered 110 million PoPs (points of presence). During the Q1 2011 earnings, it had set a coverage target of 175 markets and 185 million PoPs by the end of 2011. [1] It seems it has executed its plans and made good on its promise as it recently announced that the service will be available in 178 markets by Nov 17th, more than a month ahead of schedule. [2] We are expecting this rapid expansion to have helped Verizon gain subscribers and subsequently increase its subscriber market share in the last quarter.
In September, Verizon introduced a new $99 Android smartphone, the Pantech Breakout, that runs on its 4G LTE network. [3] By coming out with a budget smartphone, it is looking to expand its LTE user base thereby getting more consumers addicted to the faster broadband speeds and making them more likely to buy additional bandwidth every month. We are expecting more such updates on ways by which the company plans to promote and recover the costs of the LTE network it has laid out so rapidly.
Increasing smartphone penetration
During the last quarter’s earnings call, Verizon reported that it had posted better than expected net subscriber addition numbers driven mainly by the 2.3 million iPhone units it had activated in that quarter. A study by Chitika Insights puts Verizon’s market share of Android smartphones at around 41%, ahead of both AT&T and Sprint. [4] We believe Verizon will continue to post good smartphone sales this quarter as well and with smartphone users also being heavy data users, it will translate into higher data revenues for the company.
We will watch and see how these numbers stack up for Verizon in the upcoming earnings release.
Understand How a Company’s Products Impact its Stock Price at Trefis
Notes:- Verizon’s Q1 2011 Earnings Transcript, SeekingAlpha, April 21st, 2011 [↩]
- America’s Fastest And Most Reliable 4G Network Expands To More Than 175 Markets On Nov. 17, Verizon News Release, October 10th, 2011 [↩]
- Pantech Breakout: Budget 4G phone for Verizon, ZDNet, September 19th, 2011 [↩]
- Android Market Update, Chitika Insights, August 17th, 2011 [↩]
