) recently announced that it will waive its $35 activation fee for
Android-based tablets Xoom and Galaxy for month-to-month data
plans. Below we present our quick take on this announcement.
Verizon competes with other mobile operators like AT&T (
) and Sprint (
) in mobile and landline business.
Our price estimate for Verizon stands at $36.62
which is slightly above the current market price.
Brief Look at the Details
Verizon will not be charging activation fee of $35 to its
customers who activate their 3G tablets on its network. Moreover,
consumers who find that they have been charged the fee, will be
receiving credit on the bill that cancels it out. This gives users
a flexibility to activate and deactivate data service as many times
as they desire without being hit by the extra fee.
Our Quick Take
Verizon was already not charging any activation fee for iPad 2
in order to stimulate user interest further which only makes sense
given that the partnership with Apple (
) has developed recently. Thus on its part Verizon wants to promote
Apple's product as much as possible. However, given new Android
based entrants have made it to the tablet market, it did not make
sense to keep activation fee on for them. This is simply promotion
of fair play in the industry.
What this may mean in terms of value creation for Verizon? This
is an incentive for customers to buy 3G supported tablets and
activate 3G data service. Those who might have been interested in
trying the 3G plans on tablets but have hesitated on costs, now
have one more reason to get the data plan a try. The loss of
activation fee revenues could well be made up by more people
signing up for data service and besides, this was a necessary move
to remain competitive by keeping subscribers happy.
This directly impacts Verizon's data revenues. We estimate that
mobile phones & plans constitute about 43% of Verizon's price
estimate and that mobile data business is roughly around 34% of
mobile phones & plans in terms of value. Above you can see how
can impact Verizon's price estimate.
full Trefis analysis on Verizon