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Verizon Becomes More Attractive After This Development

May 18, 2014 | About:
Quick Pen

Quick Pen

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The top US telecom player, Verizon (VZ) recently thrashed the Wall Street estimates with better than expected earnings and delivered double digit bottom-line growth, bringing smile on the face of every investor. The Big Red has always been an investor’s favorite and now, with this latest development Verizon will attract even more investors, as well as customers.

On Monday, May 19, the telecom major is going to launch a super-high speed network which it proudly calls “XLTE” that promises double bandwidth accompanied by super-fast downloads. The XLTE network is an improvement of the existing 4G LTE network made possible by the addition of AWS wireless spectrum. The implication for the Big Red customers is that if they live in a region that will allow them to have access to the AWS wireless spectrum, they will be able to witness much faster downloads with better stability and less congestion.

Verizon has been testing its latest offering for some time now and customers living in the test areas have already noticed massive difference in performance. Once the network is deployed all over US, all of Verizon’s customers will benefit from it. As of now the list of initial cities to get access to the XLTE network hasn’t been revealed by the company and Verizon plans to take up the deployment slowly and gradually. By the end of the year, Verizon has plans of rolling out the network in 50 markets. However, the customers in most of the major cities can expect to experience this network from Monday.

The top US telecom player has been facing difficulties in providing its existing 4G LTE customers with promised speeds. The company has been under stiff pressure because of the fast growing subscriber base, resulting in more customers for the fixed bandwidth. As a result of this, its customers have not been getting the speeds as fast as they should have got. However, with the deployment of XLTE, Verizon will be able to take care of these existing issues.

This, however, will not be a hassle free process. Verizon might face difficulties related to hardware compatibilities and might have to upgrade its equipments for several regions. Another barrier that the company is likely to face is the customer-side hardware issue. Not every customer will be able to take benefit of the XLTE network with their existing devices. While some of the latest Apple (AAPL) iPhones will be able to deliver improved speeds, the chances of most other handsets of pulling off the same are minimal. Nevertheless, Verizon also plans to focus on two new handsets- HTC One M8 and Samsung (SSNLF) Galaxy S5 - that will provide the best results for the network.

With so much going on, it seems Verizon will very well be able to attract more customers, both through new acquisition and through migration from opponent networks. In the light of this, better performance can surely be expected from the company, making it a good investment option. Even investment guru Warren Buffet believes in the growth potential in Verizon. Buffet’s Berkshire Hathaway (BRK.A) in its recent 13-F filing disclosed that the firm has initiated a position in the telecom major by investing in 11 million shares, translating into a $530 million investment. Following the announcement, shares of Verizon jumped 1.6% in after-hours trading.

Verizon Wireless was being controlled together by Verizon and Vodafone Group. Now that the former has the entire control of Verizon Wireless, thanks to the $130 billion acquisition of Vodafone’s 45% stake, Buffet believes the company will benefit greatly. Also, the deal signifies that there is unutilized growth potential in the US telecom sector and Verizon with its robust and very well defined plans seems to be positioned well to realize the most out of it.

About the author:

Quick Pen
A seasonal writer with a Management Degree in Finance and interests in automotive, technology, telecommunication and aerospace sectors.

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