Verizon (NYSE:VZ) reported first-quarter earnings of $1.15 on the strength of a gain on the sale of its minority interest in Vodafone Omnitel. The telecommunications giant is however facing a tough competition from the likes of AT&T (NYSE:T), Sprint (NYSE:S), and T-Mobile (NASDAQ:TMUS). But Verizon has done well so far in retaining its market share. In addition, Verizon’s strategy of consistent investments in networks and platforms have been successful, and the same is expected in the future. Let’s have a look at whether investors should be interested in Verizon.
Moving Forward Aggressively
Verizon recorded adjusted earnings per share of $0.84 for the first quarter compared with $0.68 a year ago. For the full-year 2014, Verizon is targeting a 4% consolidated top line growth, with an expansion of its consolidated EBITDA margin. Going ahead, the company is focusing on the machine-to-machine sector and the acquisition of more spectrum. With its 4G LTE coverage build at a completion stage, Verizon’s wireless spending is now focused on adding capacity to its existing coverage and utilizing its AWS spectrum to further optimize its network.
Rivals Are Not Sitting Idle
Verizon looks to be having the right strategy by building a strong LTE network, but it has challenges from AT&T. AT&T projects to reach 300 million people by 2014 with its unique offerings in its LTE network. The improvement in its operations coupled with an aggressive marketing strategy should make it achieve its objective. AT&T aims to make its network more efficient by focusing on price, consumer service, and technological innovation. But Verizon is looking to counter this by delivering new services such as VoLTE to enrich its customers’ wireless experience.
- Warning! GuruFocus has detected 3 Warning Signs with VZ. Click here to check it out.
- VZ 15-Year Financial Data
- The intrinsic value of VZ
- Peter Lynch Chart of VZ
Verizon also needs to look out for the competition from smaller peers such as T-Mobile and Sprint. T-Mobile is aiming to make its network more efficient by using a 4-by-2 multiple input-multiple output technology in selected cities. Also, T-Mobile’s EDGE network at present covers around 284 million people. An upgrade of its LTE network will make it an even more serious rival to Verizon.
Reasons to be Positive
Verizon intends to increase its revenues in the near future. It plans to increase customer activations through its Verizon Edge. To provide more value through simplified data allowances, it introduced its MORE Everything plan. It revised its monthly pricing under Verizon Edge for customers who purchase devices on installment payments. In addition, it signed agreements to acquire the wireless license of Cincinnati Bell. To provide an ultra-fast connectivity to applications and smartphones, Verizon is expanding its network advantage in 4G LTE. Verizon is also improving its network in order to offer robust video delivery services.
Even though Verizon purchased Vodafone's 45% stake in Verizon Wireless, it has not ruled out an international expansion. It is teaming up with Weston Group to expand its global logistics reach. Verizon plans to have several international 4G LTE roaming partners lined up through 2014. The move will allow Verizon customers to go overseas and still get a consistent high-speed wireless connection.
There is a positive outlook for Verizon in 2014. The company’s future quarters will include 100% of its net income from the wireless segment. The company plans to invest in its networks, acquire more spectrum, and add to its capacity. It does not need to execute any major acquisition to drive its business model. Therefore, investors are advised to consider an investment in Verizon as the stock looks well-positioned for gains in the long run.