Telecom Lead America: Verizon is gaining in the LTE / 4G market.
Verizon continues to lead the U.S. industry in terms of both revenue and subscribers due to its time-to-market lead in LTE, shared data plans that are spurring increased connected device adoption, in addition to its superior postpaid segment that continues to post high net additions. Verizon’s 4.2 percent year-to-year growth in total revenue and 720,000 total retail net additions will be hard for AT&T and Sprint to match in 1Q13.
The operator will continue to drive data revenue growth in 2013 by deploying the last portion of its initial LTE network, diversifying its device lineup with multiple platforms, and heading toward a more data-focused strategy concentrated on connections and its Share Everything plans. These initiatives will strengthen Verizon’s business and help the company maintain the top U.S. operator position throughout 2013.
Verizon is the top operator in the postpaid segment in revenue and connections, due in part to the 2012 launch of its Share Everything plans. Verizon has thrown its full support behind its shared data plans, which is already beginning to pay off with record net additions and strong adoption in the postpaid segment. The operator has 30 percent of its postpaid segment on these plans, and is reporting an increase in postpaid revenue and connections as a result. The average connection per account is up 5.1 percent year-to-year to 2.67 connections. The result on growing connections is increased data consumption. This will lead to higher data revenue and therefore an increase in wireless service revenue throughout 2013.
To capitalize on the increase in connections, Verizon is promoting its LTE networks and devices. The higher its LTE penetration, the faster Verizon will be able to increase data revenue. In April, 54 percent of Verizon’s total traffic ran over its LTE network and 28 percent of its total connections were LTE capable. These are numbers Verizon will look to rapidly improve in 2013 through its large LTE portfolio of devices and its advantage in LTE coverage that reaches 95 percent of its 3G footprint.
Verizon announced in April that it made a bid to acquire Clearwire’s spectrum licenses for $1 billion to $1.5 billion. TBR believes this bid will not be accepted, but it will still end up as a win for Verizon. Verizon will not be able to acquire Clearwire’s spectrum assets because there are already two competing bids to purchase Clearwire; one by majority owner Sprint and the other by Dish Networks. Clearwire would be significantly less valuable to these companies without a good portion of its most valuable asset — spectrum.
Another reason, assuming Clearwire would agree to the sale of its licenses to Verizon, is that the deal would likely be denied by the FCC. Upon review TBR believes Verizon would obtain too much spectrum for one carrier to control. The operator already controls the most spectrum among the Tier 1 operators in the U.S., and former merger attempts by AT&T and T-Mobile lead us to believe the outcome would end the same way for Verizon.
However, there is an upside to this deal for Verizon no matter the outcome. If the deal succeeds, Verizon obtains very valuable spectrum from Clearwire that it could then use for supplemental LTE coverage, especially in the large urban markets that Clearwire covers. This would also prevent Sprint from obtaining these licenses that it requires for its future network build plans. However should the deal fail, Verizon managed to cause a delay in the sale process to Sprint, which will slow down Sprint’s future deployment plans and provides Verizon with more time to increase the distance between itself and the competition. Regardless of the outcome, the bid was a smart move by Verizon.
Eric Costa, analyst in TBR’s Networking and Mobility Practice
editor@telecomlead.com
