Verizon Communications Inc.’s (VZ) consistent market share gains, strong LTE (Long-Term Evolution) sales and the rollout of FiOS Internet should serve as key contributors to the company’s growth in the long run. Meanwhile, robust addition of tablets and Wi-Fi devices are increasing the number of gadgets per customer, thus driving revenues higher for the company.
Verizon has a strong foothold in the wireless market and expects growth from higher penetration of devices and increasing market penetration of 4G LTE services. In October, the company closed its previously announced deal with Cincinnati Bell for purchasing spectrum licenses worth $194 million. The deal incorporates licenses in key markets like Greater Cincinnati and Dayton, OH, areas of northern Kentucky and southeastern Indiana. In these areas, Cincinnati Bell reportedly offers GSM-based 2G, 3G and HSPA+ services through 460 cell sites.
We also appreciate the various promotional plans that Verizon has launched over the last couple of months. The company has been significantly benefiting from its Edge plan initiated last year, which now accounts for $115 million in EBITDA gains. Adoption rate for Verizon’s Edge monthly instalment and upgrade program is expected to be higher going forward as it is extending the distribution nationwide.
Verizon recently stated that it foresees robust wireless customer growth, going forward. Demand for 4G tablets and smartphones on its “More Everything” shared data plan has been reasonably strong so far in the fourth quarter.
Verizon Communications apprehends that its earnings in the final quarter of 2014 may dwindle on account of higher promotional expenses and price cuts. In an effort to expand its customer base, the company is spending heavily on promotions and is also offering lucrative discounts. These initiatives are likely to impact Verizon Wireless’ EBITDA and EBITDA service margin in the coming quarter.
Verizon currently has a Zacks Rank #3 (Hold).
Key Picks in the Sector
Better-ranked stocks worth considering in this sector include SK Telecom Co. Ltd. (SKM), Vonage Holdings Corp. (VG) and China Unicom (Hong Kong) Limited (CHU). SK Telecom sports a Zacks Rank #1 (Strong Buy) whereas Vonage Holdings and China Unicom hold a Zacks Rank #2 (Buy).
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