This document provides an overview of Verizon Wireless and its business segments. The key points are:
1) Verizon has two main business segments - Verizon Wireline and Domestic Wireless. Wireless provides services to over 91 million customers across the US, while Wireline offers services in the US and over 150 countries.
2) Verizon has invested heavily in its 4G LTE network, launching in 38 major markets in 2010. It plans to expand coverage to over 200 million people by the end of 2011.
3) Data revenues are a major growth area for Verizon, increasing by $4 billion to $19.6 billion in 2010 alone. Verizon is excited by revenue opportunities from 4G
4. BUSINESS SEGMENTS
Verizon Wireline Domestic Wireless
• Voice, Internet access, broadband • Provides wireless voice and data
video & data, next generation IP services to nearly 91.2 million
network services, and long distance. people
• Provides services in U.S. as well as • Network covers a population of
150+ other countries approx. 290 million
• FiOS TV: 565 all-digital & 125 HD • Operates primarily a CDMA
channels, available to approx. 11.7 network as well as a GSM network
million homes across 14 states with 90% users postpaid
• Partnership with DIRECTV, double/ • Prepaid users make up remaining
triple-play offers in non-FiOS 10% of revenues
markets
5. SEGMENT FACTS
Verizon Wireline Domestic Wireless
• 10.7% increase in consumer ARPU from 4Q • Year-end 2010, 26% of wireless postpaid
2009; FiOS revenues now represent approx. customer base had smartphone devices, up
53% of total consumer revenues. from 15% at year-end 2009. In Q4 2010,
more than 75% of postpaid net adds were
• 4.1 million total FiOS Internet customers and
smartphones
3.5 million total FiOS TV customers.
• Verizon launched its 4G LTE network, in 38
• 4.3 million high-speed internet customers, a
major metropolitan areas covering one-third
total of 8.4 million broadband connections
of all Americans and in more than 60
commercial airports
• Data throughput speeds of up to 10 times
faster than when on the company's 3G
network
• Planned expansion of 4G LTE network to an
additional 140 markets by the end of 2011
6. REVENUES BREAKDOWN
"During 2010, total data revenues increased to $19.6 billion. That is $4 billion of
data revenue growth in one year. Think about that number, and then you can
understand our excitement about the revenue opportunity with 4G LTE tablets,
4G LTE, all new 3G and 4G smartphones that are coming to the market."
-- Fran Shammo, Verizon EVP and CFO
$125,000M
$100,000M
$75,000M
$50,000M
$25,000M
$0M
‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10
Wireline Wireless
7. 4G Long-Term Evolution
“The key transaction was probably in 2007, when we purchased the nationwide
spectrum in the 700 MHz range, which paved our way for the investment in a superior
4G LTE network. We launched LTE in December in 38 major markets, home to a third
of all Americans. We will double that in the next 18 months to some 200 million
POPs, and we will blanket the country by the end of 2013”
-- Lowell McAdam, Verizon President and COO
8. Apple iPhone 4
• Verizon stated that they completely • AT&T tries to buy your affection
sold out of pre-order iPhone 4s
within two hours, and that those
orders exceeded the one-day total
of any other device debut in
Verizon's history
• Market estimates of 900K iPhones in
use as of the 11th, VZ management
estimates 11 million iPhones in ’11
• Online mobile advertisement
agency Chitika has a way of
monitoring what service an iPhone
carrier is and is offering live polling
• 3.2% Verizon iPhone users
(Percentages are a 24-hour rolling average, updated hourly)
9. Apple iPhone 4
• Verizon stated that they completely • And rumors of an iPhone 5 in March
sold out of pre-order iPhone 4s
within two hours, and that those
orders exceeded the one-day total
of any other device debut in
Verizon's history
• Market estimates of 900K iPhones in
use as of the 11th, VZ management
estimates 11 million iPhones in ’11
• Online mobile advertisement
agency Chitika has a way of
monitoring what service an iPhone
carrier is and is offering live polling
• 3.2% Verizon iPhone users
(Percentages are a 24-hour rolling average, updated hourly)
10. AT&T AND CHURN
churn | For any given period of time, the number of participants who discontinue their use of a
service divided by the average number of total participants. Churn rate provides insight into the
growth or decline of the subscriber base as well as the average length of participation in the service.
• 90% of AT&T iPhone
customers under
contract, but do they
want to be?
• AT&T current post-paid
churn of 1.15% vs.
Verizon current post-
paid churn of 1.01%
• ChangeWave study
suggests AT&T could
lose 26% of iPhone
customers
11. AT&T AND CHURN
churn | For any given period of time, the number of participants who discontinue their use of a
service divided by the average number of total participants. Churn rate provides insight into the
growth or decline of the subscriber base as well as the average length of participation in the service.
• 90% of AT&T iPhone
customers under
contract, but do they
want to be?
• AT&T current post-paid
churn of 1.15% vs.
Verizon current post-
paid churn of 1.01%
• ChangeWave study
suggests AT&T could Only AT&T victories
lose 26% of iPhone
customers
12. AT&T A VERIZON CATALYST
Clearly AT&T customers have their motivations, and Apple
allegiant customers have no where to go but Verizon
Graphs produced by ChangeWave Research
13. SUB-INDUSTRY OUTLOOK
• Fundamental outlook on the industry is neutral with growth
opportunity strongly linked to macroeconomic factors such as
unemployment
• Wireline
will see growth in areas of broadband connectivity as
demand for high speed access grows and is discretionary
• Anticipate
continued growth in CapEx across the industry to
keep up with technological innovation
• Resulting in slower bottom line growth as in past quarters
• Network Neutrality to be closely watched
14. NETWORK NEUTRALITY
FCC’s “four principles” of openness—essentially that consumers should be able to access any lawful
content or service from any lawful device—enshrined as law . The proposal would also prohibit paid
prioritization of traffic, meaning broadband operators would be barred from granting preferential
treatment to particular applications or service, such as those willing to pay for better performance.”
-- DigitalTrends.com
• Verizon & Google partner to draft
proposal for Net Neutrality to be
adopted by FCC
• Verizon now suing because FCC
overstepped their authority?
• Verizon now also secretly unveils
new policy to “cap” uncapped data
transfers for the top 5% of data
users as a temporary punisment
15. NETWORK NEUTRALITY
FCC’s “four principles” of openness—essentially that consumers should be able to access any lawful
content or service from any lawful device—enshrined as law . The proposal would also prohibit paid
prioritization of traffic, meaning broadband operators would be barred from granting preferential
treatment to particular applications or service, such as those willing to pay for better performance.”
-- DigitalTrends.com
• Verizon & Google partner to draft
proposal for Net Neutrality to be
adopted by FCC
• Verizon now suing because FCC
overstepped their authority?
• Verizon now also secretly unveils
new policy to “cap” uncapped data
transfers for the top 5% of data
users as a temporary punisment
16. COMPETITORS
• AT&T: Most obvious and relevant competitor, but on a GSM network, with
GSM Network
approximately 95.5 million wireless customers and original iPhone issuer
• T-Mobile: German wireless provider operating a GSM network in the U.S.
with approx. 34 million wireless customers. Provider of 9K+ “HotSpots”,
once being the free wi-fi provider for Starbucks, lost to AT&T in 2008
• Sprint Nextel: A CDMA network provider including Boost mobile,
operating on pre and post-paid subscription basis with approximately 56
million wireless customers. Sprint is also working on building a 4G network
CDMA Network
• U.S. Cellular: Operates a CDMA network with 6.2 million U.S. customers.
Plans to operate in a GSM LTE environment for its future 4G network
• Metro PCS: CDMA as well as a 4G network with 8.1 million subscribers.
• Leap Wireless: Parent company of Cricket and Jump Mobile with 4.5
million wireless subscribers operating a CDMA an EV-DO network
17. COMPETITOR MATRIX
CAGR Total Debt EBITDA
Ticker Mkt Cap ROE Div Yld
Rev 5Yr to Equity Margin
Verizon VZ 102.87B 8.9% 60.7% 29.1% 11.9% 5.3%
AT&T T 168.29B 23.2% 58.9% 26.6% 18.0% 6.0%
Sprint Nextel S 13.74B 2.5% 138.8% 17.4% -- --
U.S. Cellular USM 4.19B 7.2% 24.5% 19.6% 4.6% --
Metro PCS PCS 4.63B N/A 174.1% 27.2% 9.0% --
Leap Wireless LEAP 1.09B 22.8% 239.2% 20.6% -- --
18. S.W.O.T. ANALYSIS
Strengths Weakness
• iPhone introduction is a catalyst for wireless • Owned as a subsidiary of Vodafone and talks
growth in addition to 4G LTE network of a parent dividend have been rumored
• FiOS gaining momentum and replacing older • Large influx of new 4G devices may cost
network revenues more than anticipated by management
Opportunity Threats
• The communication industry is growing and • The slowed recovery of the economy which
demand for high speed connections are translate in reduced discretionary spending
increasing
• AT&T and Verizon differentiate mainly due to
• Opportunity to capture AT&T as churn rates contracts, phone availability and signal quality
increase
24. OPINION TUG-O-WAR
Bearish Risks Bullish Catalysts
• Changes in the smartphone share of • Verizon appears to have the most
wireless subscribers leads margin loyal customers amongst the
pressure and higher costs to providers, highly attributable to the
maintain advertised connection quality of their network
speeds • Almost as many subscribers if not as
• Wireline is likely to continue to lose many on any certain day as AT&T
the foundation of home phones with availability to nearly the entire
over time across the industry mobile U.S. market
• Management has shown interest in • New devices like iPhone 4, tablets
buying out Vodafone, although the and phones for 4G and FiOS will
outcome may be at the expense of continue to take advantage of
shareholders or the network technological trends
25. DIVESTMENT THESIS
• Verizon is poised to grow with the advent of its 4G network, but it has been a
long time coming and even competitors like T-Mobile are entering the arena.
• Net Neutrality could work in favor of VZ, as well as their competitors. VZ &
Goog proposition could ultimately tarnish the providers reputation upon
implementation
• iPhone 4 and
release of 4G
definitely already
priced into VZ
AT&T Corp bought the assets of its parent, American Bell Telephone Co. and became the head of the 22 original bell operating companies in 1899.\n\nMajority stake in Western union Telegraph Co. acquired by AT&T in 1910 and subsequently divested in 1913 in order to avoid federal takeover due to monopoly charges\n\n1984 AT&T Broken up and organized into 7 baby bells\n\n\n
1995 AirTouch and Bell Atlantic have a joint venture, PrimeCo\n\n1997 Bell Atlantic acquired NYMEX\n\n1999 Vodafone and Airtouch merger\n\n2000 Bell Atlantic acquired GTE and renamed itself Verizon Communications\n\n2000 Vodafone Airtouch drops Airtouch name\n\n2000 joint venture b/w Bell Atlantic and Vodafone along with PrimeCo. \n\n2008 Alltel bought by Verizon Wireless\n
(CDMA) Code Division Multiple Access\n(GSM) Global System for Mobile Communications\n
(ARPU) Average Revenue Per User\n(4G LTE) Fourth Generation Long Term Evolution \n\nFiOS Internet was 31% year over year improvement (197K net adds), and a 24% growth in customer base to 4.1m\nFiOS TV was 22% improvement over fourth quarter last year making annual growth over 26% with (182K net adds)\n
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Text YES to 11113020 for 1000 free rollover minutes\n
Take a closer look at the iCal symbol within the image of the iPhone 4 on the Apple homepage. \nIt says Monday 7th. The next Monday 7th is March (many are predicting a March release for the iPhone / iPad).\n\nNow look at the above image of an older version of the iPhone. The iCal symbol features the date January 9th. The significance of the 9th of January? It was on this date in 2007 that the iPhone was first announced.\n\n
Tests as performed by CNET\nChangeWave survey based on 4,050 AT&T iPhone customers\n
Tests as performed by CNET\nChangeWave survey based on 4,050 AT&T iPhone customers\n