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iPhone 5 Should Give Verizon An Edge

Posted on Wednesday, Sep 21st 2011

The iPhone was released on Verizon in February this year. However, since it was not a new model, it was not as much a success as it was expected to be. With the iPhone 5 to be released soon, a huge spurt in sales is expected at Verizon, the No.1 wireless carrier. In the meantime, its closest rival, AT&T, is facing problems with its T-Mobile deal. Let’s take a closer look.

Verizon (NYSE:VZ) reported second quarter revenue of $27.5 billion, up 2.8%. Wireless revenue increased 10.2% y-o-y to $17.3 billion. EPS was $0.57 compared with second quarter 2010 loss of $0.42 per share last year. During the quarter, Verizon added 2.2 million net subscribers, including 1.3 million retail postpaid customers, and its total wireless subscriber base reached 106.3 million. Verizon continues to have the lowest churn in the industry at 0.89%.

Verizon reported that 36% of its retail postpaid customer phone base were smartphones, up from 32% at the end of the first quarter. It activated 2.3 million iPhones during the quarter and a total of 4.5 million iPhones since it started selling the device in February 2011. The release of the new model iPhone has been delayed but it is expected in the next few weeks. The highly anticipated  iPhone 5 is expected to be snapped up whenever it comes, and it should give Verizon an edge over the other carriers.

But Verizon is not relying on the iPhone alone, and rightly so. It is the largest seller of Android devices and has recently included Motorola’s Droid Bionic in its portfolio. Google last month announced its plan to acquire Motorola Mobility and its armory of more than 24,000 patents for $12.5 billion. The acquisition is expected to help Google’s Android battle the numerous patents being filed by Apple. Verizon is trading around $36 with market cap of about $102 billion. It hit a 52-week high of $38.95 on March 30.

Chart forVerizon Communications Inc. (VZ)

Sprint (NYSE:S) reported second quarter revenue of $8.3 billion, up 4%. Wireless revenue was up 6% y-o-y to $7.4 billion. Net loss was $847 million or $0.25 per share. During the quarter, Sprint gained nearly 1.1 million net subscribers to reach a total base of over 52 million subscribers. Sprint reported its best-ever postpaid churn of 1.75% compared with 1.81% last quarter and 1.85% last year. Churn improved primarily as a result of a larger base of customers on fixed rate bundled plans or 4G handsets. The company sold 1.7 million 4G handsets in the quarter.

Approximately 9% of postpaid customers upgraded their handsets during the quarter, reflecting strong demand for Sprint’s handset portfolio and continued strength in contract renewals. Sprint was the first network to sell the Samsung Galaxy S II smartphone. Sprint is also expected to offer the new iPhone 5 on unlimited plans. The iPhone, and that too on an unlimited plan, could help Sprint to win more customers.
The stock is trading around $3 with market cap of about $10 billion. It hit a 52-week high of $5.37 on May 10.

Chart forSprint Nextel Corp. (S)

AT&T (NYSE:T) was the first carrier to launch the iPhone in 2007 and was its exclusive carrier in the U.S. for nearly four years. AT&T reported second-quarter revenue of$31.5 billion, up 2.2% y-o-y. Wireless revenue was up 9.5% to $15.6 billion. Net income was $3.6 billion or $0.60 per share compared with $4 billion or $0.67 per share last year. During the quarter, AT&T added 1.1 million subscribers, and its total wireless subscriber base reached 98.6 million. Postpaid churn was 1.15% compared to 1.18% in the recent quarter and 1.01% last year.

AT&T sold a record 5.6 million smartphones, accounting for nearly 70% of postpaid sales. Smartphone users accounted for 49.9% of its users. During the quarter, 3.6 million iPhones were activated, and sale of non-iPhone smartphones more than doubled over last year.

AT&T announced in March its plans to acquire T-Mobile for $39 billion. However, that deal is now in limbo. Earlier this month, the U.S. Department of Justice asked to block the deal, saying that the combination of the country’s second- and fourth-largest wireless carriers would violate antitrust laws and “substantially lessen competition.” In the second quarter, T-Mobile reported revenue of $5.1 billion and customer losses of 50,000, an improvement from 93,000 customer losses last year. T-Mobile has a subscriber base of 33.6 million and with the acquisition AT&T would overtake Verizon as the No. 1 U.S. wireless carrier.

If the deal falls apart, AT&T would have to pay T-Mobile’s parent company Deutsche Telekom about $7 billion in fees and other concessions. AT&T is fighting hard to save the deal. It said that the addition of T-Mobile would let it expand 4G LTE mobile broadband to another 55 million Americans and produce “billions” of additional investment. It also said the acquisition would help solve the country’s “spectrum exhaust situation.” It also says it is committed to bringing back to the U.S. 5,000 wireless call center jobs that are now outsourced to other countries.

AT&T is trading around $28 with market cap of about $170 billion. It hit a 52-week high of $31.94 on May 3.

Chart forAT&T, Inc. (T)


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