One of the leading wireless carriers in North America, Verizon Communications Inc. (VZ) recently commenced the sale of cheaper 4G smartphone called Pantech Breakout from Pantech, one of the leading Korean handset manufacturer.
The new handset is currently available in all Verizon stores at a subsidized rate of $99.99 and can also be purchased online. The new device will be available along with Verizon’s two-year Nationwide Talk plan, priced at $39.99 per month coupled with a 2 GB data access plan worth $30 per month.
The new 4G smartphone is powered with the popular Android 2.3 (Gingerbread) and 1 GHz processor that supports download speed of up to 5 to 12 mbps. It also features a 5 megapixel camera, which supports HD video recordings.
With the deployment of 4G networks, carriers including Verizon are looking forward to supplement 4G network plans to their subscribers by means of selling 4G-based smartphones at a subsidized rate.
Recently, Verizon’s close rival AT&T (T) also launched a chaeper Huawei-based 4G smartphone. Moreover, Amazon.com, Inc. (AMZN) is offering 4G wireless phones at a much discounted rate, which will further increase the competition for cheaper 4G handset sales.
We believe Verizon’s continued investments in its broadband network,strong wireless and FiOS services, cloud computing business, share gains in the retail post-paid market along with increasing smartphones penetration and other data devices will drive profitability over the long term. Further, the fourth-generation Long-Term Evolution 4G (LTE) network and iPhone sales will boost the company’s future growth prospects.
However, persistent erosion in access lines, high promotional and restructuring expenses, and intense competition from cable companies and other alternative services providers may add downside risk to the stock.
We, thus, maintain our long-term Neutral recommendation for Verizon Communications Inc. Currently, Verizon Communications Inc. has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
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