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Verizon Buoyed by a Slew of Positives, Competition Rife

On Oct 9, we issued an updated research report on U.S. telecom behemoth Verizon Communications Inc.VZ .

Verizon reported mixed financial numbers in the second quarter of 2015 wherein earnings beat the Zacks Consensus Estimate while revenues lagged the same.

The company added a number of customers in the quarter and also managed to check customer churn. Consistent market share gain, strong LTE (Long Term Evolution) sales and the rollout of FiOS Internet have been key contributors to growth.

Notably, Verizon is currently focusing on online content delivery, mobile video and online advertising for growth. These businesses have the potential to generate significant revenues for the company given that its legacy telecom business is presently facing serious pricing competition.

In Jun 2015, Verizon took over AOL Inc., a major player in the digital content and online advertising space, for $4.4 billion. Moreover, last month, Verizon announced that AOL has decided to acquire Baltimore-based mobile advertising company, Millennial Media Inc. Thus, acquisition of AOL and Millennial Media will enable the company to sell digital media services to large companies and social media firms by monetizing its massive wireless customer base.

Recently, Verizon announced its decision to merge its existing advertising programs, Relevant Mobile Advertising and Verizon Selects, with AOL Advertising Network, effective Nov 2015. The combination of these two ad technologies will provide valuable information to advertisers and allow them to effectively post their advertisements on AOL's websites and most importantly through Verizon's latest Go90 mobile video service.

Verizon forayed into the wireline industry with the fiber optic network concept gaining increasing popularity. Interestingly, this has become the most sought-after technology for secure and fast data transmission over long distances. Meanwhile, it is being estimated that the wireline industry will largely evolve around fiber-based gigabit data transmission.

Further, the board of directors of Verizon approved a 2.7% hike in the company's quarterly cash dividend on its common stock to $0.565 per share from $0.55 paid earlier. The increased dividend will be paid on Nov 2, 2015, to shareholders of record at the close of business as of Oct 9, 2015.

However, a saturated wireless market, access lines losses, heavy capital spending and regulatory risks may pose near-term threats to Verizon. Further, intensifying competition in the U.S. wireless market from peers like AT&T, Inc. T , T-Mobile US, Inc. TMUS and Sprint Corp. S is another major concern.

Verizon currently has a Zacks Rank #3 (Hold).

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AT&T INC (T): Free Stock Analysis Report

SPRINT CORP (S): Free Stock Analysis Report

VERIZON COMM (VZ): Free Stock Analysis Report

T-MOBILE US INC (TMUS): Free Stock Analysis Report

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


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

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