Verizon, Sprint, AT&T Benefit From Older Data Users, Social Networking

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For wireless carriers like Verizon ( VZ ), AT&T ( T ) and Sprint ( S ), older mobile users remain an under penetrated group for data subscribers and an interesting opportunity. Customers over the age of 50 tend to text message less and use much less mobile data than younger peers. However, with the proliferation of smartphones and the growing popularity of social networking, this is changing quickly.

An AT&T Vice-President recently mentioned to Bloomberg that this demographic presented an attractive area of growth, and if carriers can reach out to this demographic effectively, there exists an opportunity to improve data revenue per subscriber.

Below we include the average data revenues per subscriber estimates for the three companies, and below each chart we include a price estimate and sensitivity scenario. Sprint was the most sensitive to changes in the average data estimates.

( Our price estimate for Verizon is $31.69 , slightly below the current market price. By dragging the trend line, a 5% increase in data revenues in 2011 equals an approximate 1.1% increase in price estimate.)

Magnitude of Opportunity

Comscore estimates that about 42% of customers in the 50+ year old demographic segment in the U.S. used text messaging service at least once a month in Q3 2010 compared to 85% for the 13-34 demographic. This indicates that the usage for the older segment is almost half of the younger segment.

Additionally, the aging population is increasing in proportion to the overall U.S. population. The US Census Bureau expects the proportion of the U.S. population that is 65+ years old stood at around 12.7% in 2008, and it expects this figure to increase to 14.4% by 2015 and to almost 18% by 2025. Clearly, the older segment will become an important market for wireless carriers.

Consequently, carriers are offering lessons on how to text, introducing phones with larger sized buttons to make it easier to text and increasing media budgets to target older users. Text messaging is just the start as companies hope to increase the number of data plans and increase usage in this segment.

( Our price estimate for AT&T is $37.84 , around 36% above the market price. By dragging the trend line, a 5% increase in data revenues in 2011 equals an approximate 1.3% increase in price estimate.

( Our price estimate for Sprint is $4.35 , around 13% above the market price. By dragging the trend line, a 5% increase in data revenues in 2011 equals an approximate 5% increase in price estimate.)

Social Networking Goes Mobile

While carriers are devising strategies to target older customers, there is a trend that might just make their job easier. Social networking is increasingly mobile and older users are catching on.

According to Comscore data, the ratio of U.S. mobile users accessing social networking sites increased from 13.8% in Oct 2009 to 17.1% in Jan 2010. This figure further increased to 20% by April 2010.

Older users are catching on too. The Pew Research Center estimates that social networking usage among the internet users belonging to age group of 50+ increased from 22% to 42% between mid-2009 and mid-2010. Additionally, Insidefacebook.com reported in 2009 that women over 55 years of age are one of the fastest growing demographic on Facebook.

The trends of increasing mobile media and social networking and increased use of social networking among older individuals are likely to come together and encourage older generation to use more mobile data services.

Click to see full estimates for: Verizon , AT&T and Sprint .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: CMCSA , S , T , TWC , VZ

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