The 4G LTE market is a huge landscape, encompassing both private and government organizations. There is enormous gain for mobile providers that can deliver efficient solutions for 4G LTE-enabled devices to surf the web, post status-updates, share music and download files at speed faster than other networks.
So when Verizon Communications Inc. (NYSE:VZ) announced that it has activated 4G LTE coverage to two sites in Delaware County in New York, I was not surprised by the initiative. Below, I will explain why Verizon Communications Inc. (NYSE:VZ)’s 4G LTE roll out, combined with the launch of associated devices – along with its wireless service revenue growth – will allow it to stay ahead of the others and improve its price multiple.
LTE Roll out
Over the past two years, Verizon has made the 4G LTE network available to more than 273 million people across the US. Recently, the company expanded the network to Cayuga County, Chautauqua County, Rochester, Syracuse, and Utica-Rome in the New York area. The initiative has allowed Verizon to extend its 4G LTE network, provide speed for surfing the internet, and strengthened the company’s investment in local exchanges used for business and consumer communications.
o carry out its 4G LTE roll out and other program, Verizon Communications Inc. (NYSE:VZ) acquired a lot of debt – about $52.0 billion at the end of 2012. But the company’s debt situation is not likely to affect its ability in the short term to maintain its dominance in the 4G LTE sector. Its revenue, about $115.8 billion in 2012, should help play down and control its debt.
LTE-Enabled Devices
The company’s strong balance sheet in 2012 helped Verizon to roll out its 4G LTE network and launch 4G LTE-enabled products. In the fourth quarter of 2012, the company released eight 4G LTE–enabled Smartphone. In addition, the company launched three tablets.
While the 4G LTE network will create revenue in the short and long term, if it is not accompanied by the relevant Smartphone and tablets, it may not achieve its true potential. It could also provide a way for Verizon’s rivals to take away customers from the company, as other telecom companies can provide similar services to consumers. But since Verizon has evaluated the situation, it decided to deplore 4G-enabled devices into the market.
Wireless Service Revenue Growth
At its fourth-quarter 2012 earnings report, Verizon Communications Inc. (NYSE:VZ) reported 8.5% growth for its wireless service revenue. It also reported a 15.7% increase for FiOS revenues, and 5.3% growth for strategic enterprises services. Compared to peers AT&T Inc. (NYSE:T), which reported 27.2% wireless income growth, and Sprint Nextel Corporation (NYSE:S), which reported an18% wireless growth, Verizon is right on par to remain competitive.
Along with expanding its 4G LTE network to metro areas , including New York, Los Angeles, Chicago, Detroit, and Philadelphia, Verizon has rolled out its network to 471 other markets across the United States, becoming the, largest provider of the service. The company aims to complete its 4G LTE rollout by mid-2013. However, AT&T, intends to provide at least 300 million Americans with 4G LTE service by the end of 2014 and has just released a list of 77 markets where it will make the facility available by summer. Sprint Nextel has launched 4G LTE in 58 cities, with nearly 170 more expected in coming months. But Verizon is still ahead.
Other Players
Investors should not underestimate the 4G LTE market as it is expected to show growth in the near future. According to Mind Commerce, a research firm, the global 4G LTE market will reach over $13 billion by 2015, growing at a CAGR of 45%. CenturyLink and Windstream are hoping to cash on this by providing 4G LTE network.
However, Verizon Communications Inc. (NYSE:VZ) has a head start. With a gross margin of 56.50%, compared with 47.16% for AT&T, 37.23% for Sprint, and 50.01% for Windstream, Verizon does seem to be doing better than its rivals.
And investors should not be discouraged by the commitment of Verizon’s rivals to roll out the 4G LTE network and compete effectively with the company. Sprint recently announced that it was adding nine more 4G LTE markets to its network. The nine markets include Altoona, Pa., Asheville, N.C., Columbus, Ind., Elkhart/Goshen, Ind., Hammond, La., La Cross, Wis., San Juan, Puerto Rico, Statesville, N.C., and Temple, Texas. AT&T recently launched LTE networks in six new cities and said the service is now live in 176 others.
Bottom Line
Relying on its strong balance sheet, its impressive roll out initiative, and the launch of LTE-enabled devices, Verizon Communications Inc. (NYSE:VZ) has managed to extend business services without having to completely restructure its operations. Combined with its plan for the near future, the company is poised to pull away from competitors such as AT&T and Sprint.
Adetokunbo Abiola has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
