Verizon (
VZ
) could see its data revenues climb faster than expected next year
as a result of increasing data usage among mobile users and the
potential addition of the iPhone to Verizon's smartphone lineup.
Verizon competes with Sprint Nextel (
S
), AT&T (
T
), Comcast (
CMCSA
), and Time Warner Cable (
TWC
) in the mobile market.
While we expect data ARPU (average revenue per user) to reach
$22 by 2013, the Trefis community predicts this will climb to
around $25 and translate to around 5% upside to our
Trefis price estimate of $31.69 for Verizon's
stock
. Both of these estimates could be conservative if the migration to
smartphones and growth in ARPU outpaces our current estimates as
outlined below.
Wireless Data Market
The wireless data market is still in the early days of growth
relative to its potential and so there is ample room for growth in
data ARPU. We expect leading telecom players like AT&T and
Verizon to benefit handsomely from the growth in data use, which
carries much higher ARPU than basic voice services. Chetan Sharma,
an independent telecom industry analyst, predicts that mobile data
traffic in North America and Western Europe will exceed an Exabyte
(10^18) in by the end of 2010.
Improving Technology Results in Higher Data
Usage
As 3G technology spreads globally, mobile data usage will
continue to grow. According to ABI Research, from 2009 to 2015 data
usage in Western Europe and North America is expected to increase
at a compound annual growth rate (CAGR) of 42% and 55%
respectively.
In a recent article, we wrote how Verizon has an early market
entry advantage in 4G LTE network deployment and how the
availability of LTE-based smartphones will lead to higher ARPU
growth for Verizon. (See
Verizon Higher Data Revenues From 4G Launch
)
Verizon iPhone Adds Catalyst
In addition to this, the much anticipate iPhone should further
aid Verizon's data revenue growth. iPhone users are among the
highest users of data and AT&T earns an estimated ARPU between
$80-$90 per month. This compares to an average overall ARPU of
around $18 for Verizon so clearly an influx of iPhone users could
move Verizon's ARPU higher.
This bodes well for Verizon as many iPhone users are unhappy
with their current service provider AT&T, according to recent
surveys. These surveys suggest that many of these users could
migrate to Verizon once it carries the iPhone. In addition to this,
many current Verizon subscribers who do not have smartphones could
join data plans thus accelerating the penetration of
smartphones.
Member Forecast
Trefis members forecast that SMS & Internet Revenue per
Verizon Mobile Subscriber will increase from ~$20 per month in 2010
to ~$25 per month by 2013, compared to the baseline Trefis estimate
of an increase from under $18 to $22 during the same period. Using
this trend line, the member estimates imply an upside of 5% to the
Trefis price estimate for Verizon's stock, which may be
conservative if the above scenarios play out.
Our
complete analysis for Verizon's stock is here
.