) primarily competes with major operators like AT&T (
) and Sprint (
) in the mobile business. Based on size and scale, Verizon's most
direct competitor is AT&T. Despite a push from AT&T over
the past 3+ years, as the exclusive carrier of Apple's (
) iPhone, Verizon has been able to thrive on sales of Research in
) Blackberry smartphone, as well as Google (GOOG) Android-based
Our price estimate for Verizon stands at $31.69
, which is about 10% below the market price.
Verizon is now officially getting the iPhone, following months
of rumors. While many believe this to be icing on the cake for the
carrier's ongoing success in smartphones, it could actually prove
to be a double-edged sword. Verizon will offer an unlimited data
plan for the iPhone, an option no longer available through
AT&T. While this plan will command a premium from subscribers,
it could trigger heavy data usage and pose problems for Verizon's
network (although Verizon has dismissed these concerns).
Network Congestion a Concern?
Verizon's unlimited plan could be a differentiating factor that
lures additional iPhone customers away from AT&T. While most
users may not opt for the unlimited data plan, the unlimited data
subscribers could still see substantial data usage, causing network
congestion. AT&T has already faced these issues in the past,
and it now appears that Verizon will be tested.
It's Not Just the iPhone
Verizon has been increasingly shifting its dependence from
Blackberry to Android-based phones, as we've previously discussed (
Verizon - increasing Android Mix Can Accelerate
Subscription Revenue Growth
). According to a study conducted by telecom network technology
firm Arieso, subscribers using Android-based smartphones are
adding more data traffic than users of any other smartphone,
primarily due to more advanced cameras and video recorders in
addition to software that permits users to edit video footage.
While the continuing shift to Android will already strain Verizon's
network, the addition of an unlimited iPhone plan could magnify
If this happens, Verizon's brand image and reputation for
best-in-class service could suffer. Any such affect would likely
hinder the company's ability to continue market share gains. While
we currently project a gradual increase in Verizon's market share
over the coming years, network congestion concerns could provide
downside to our forecasts and stock price estimate. We note that
our price estimate already stands about 10% below market price, so
any further concerns should not be welcome news to investors.
Do you think Verizon can handle the expected jump in data
traffic, or at least mitigate its impact with migration to LTE?
Let us know your thoughts by providing feedback in the comment
box below. You can also drag the trend line in the modifiable
chart above to see the impact of various market share scenarios
on Verizon's stock value.
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You can see
the complete $31.69 Trefis price estimate for
Verizon's stock here.