In the wake of its quarter-ended March earnings report, it has now become clear that Verizon is true to its growth story. Moreover, Verizon has enhanced its bid for full control of its prime gem Verizon Wireless, signaling its thirst for total dominance in the U.S market.
The impetus behind Verizon Communications Inc. (NYSE:VZ)’s growth has and will continue to be Verizon Wireless. The wireless segment greatly contributed to the revenue reported in the quarter-ended March. The company’s top line increased 4.2% from the year-ago quarter to $29.4 billion. Verizon Wireless raked in $19.5 billion, increasing 6.8% year-over-year and outpacing the company’s full growth. This upsurge in revenue pulled the company out of the red, as seen in 2012 Q4; the company brought in net income of $1.9 billion, an increase of 15.8% year-over-year.
Focus on sustaining sales momentum
2013 is expected to be a tipping point for carriers, Verizon Communications Inc. (NYSE:VZ) included. True to the IDC’s earlier forecast, smartphone shipments all across the world outstripped feature-phone shipments, signaling increased penetration of smartphones.
In view of this, Verizon is doing all it can not only to maintain but also grow its smartphone sales. One key highlight in the quarter-ended March was the fact that iPhone sales dipped. Although iPhone sales have been known to plunge in the wake of any holiday season, this year’s fall was unprecedented. In 2012, iPhone sales slipped 24%. This year however, they slipped 33%.
To offset this, Verizon Communications Inc. (NYSE:VZ) is placing renewed focus on Research In Motion Ltd (NASDAQ:BBRY). Online advertising network Chitika contends that the BlackBerry Z10 received a significant sales boost after the U.S. Verizon launch. By looking at traffic from different handsets, Chitika affirmed that the Z10 – after launching in AT&T Inc. (NYSE:T) and T-Mobile – accounted for only 2.9% of Research In Motion Ltd (NASDAQ:BBRY) traffic in the U.S.
After the Verizon launch however, Z10 traffic rose swiftly, accounting for 5.3% of Research In Motion Ltd (NASDAQ:BBRY) traffic as at April 11. It was later confirmed that Verizon had renewed its marketing efforts for the Z10. This, coupled with flourishing Android sales, will be instrumental in offsetting the iPhone 5’s thinning demand.
Driving out competition through sheer dominance
Verizon’s current tussle with Vodafone Group Plc (ADR) (NASDAQ:VOD) over Verizon Wireless signals the carrier’s thirst for dominance. If Verizon ultimately manages to ink a deal with Vodafone Group Plc (ADR) (NASDAQ:VOD), which I believe it will, it will have the leverage to drive out its competition. Vodafone, which has a 45% stake in Verizon Communications Inc. (NYSE:VZ) Wireless, is asking for $130 billion, the WSJ reports. Verizon, on the other hand, is only willing to part with $100 billion. Vodafone Group Plc (ADR) (NASDAQ:VOD)’s executives have recurrently ventured that a deal could attract a tax bill of up to $10 billion.
According to the report, Verizon’s plan is to come up with a deal that partly offloads Vodafone’s tax burden. Whether or not a deal will come to fruition is an issue that can well be addressed by the two companies. Nevertheless, Verizon Communications Inc. (NYSE:VZ)’s relentless push for a deal signals its desire to dominate the wireless segment.
As Vodafone argues to push for a more lucrative deal, it still has to ward off allegations relating to its failure to adhere to European roaming tariffs. Spain’s telecom regulator says that it’s pondering whether or not to fine Vodafone. Reports indicate that a fine could reach up to 2 million euros, or $2.6 million. Vodafone is accused of automatically charging a constant roaming fee of 4 euros a day to customers traveling Europe. By doing this, it bypassed the different maximum fees under Europe-approved tariffs.
Competitor’s earnings
AT&T Inc. (NYSE:T), which is Verizon Communications Inc. (NYSE:VZ)’s closest competitor, equally had a relatively good quarter, increasing its profits by 3%. AT&T Inc. (NYSE:T)’s profits came in at $0.64 a share on sales of $31.4 billion.
The main headline in its earnings call however, was the huge loss of high-paying telephone subscribers. Although the company beat analysts’ expectations of 195,000 new subscribers and added 296,000 subscribers to its services in the first quarter, it lost 69,000 high-paying telephone subscribers. Most telephone subscribers chose Verizon, which despite increasing its charges still managed to increase its telephone-subscriber base in the first quarter.
Conclusion
I believe that Verizon’s wireless segment is its prime gem and the secret behind its prolonged growth. If the Vodafone deal pans out, a lot of opportunities will open up for Verizon. Not only that, but the deal will also sideline the competition and give Verizon the upper hand in view of the ongoing data blowup. This spells out huge growth possibilities moving forward. Go long on Verizon.
The article Verizon — True to Its Growth Story originally appeared on Fool.com and is written by Lennox Yieke.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
