Verizon Wireless, Vodafone And Verizon Communications: Still Dominating In 4G LTE Market In The United States

Includes: S, T, VOD, VZ
by: Nick Chiu

Verizon Wireless, a mobile network operator, is the largest wireless communications services provider in the United States with 98.2 million subscribers as of Q4, 2012. Verizon Wireless is a joint venture of Verizon Communications (NYSE:VZ), 55%, and Vodafone Group PLC (NASDAQ:VOD), 45%. Vodafone Group is the second-largest wireless company in the world behind China Mobile (NYSE:CHL) and the largest carrier in terms of the number of countries served. The share price of VOD decreased 2.04% and closed at $27.31 on January 29, 2013, since our last article of "Vodafone Group: Cash Flow Still King," published on October 23, 2012. However, two dividends of $0.51 were distributed on November 20, 2012, and November 23, 2012. In this article, new developments will be updated for Verizon Wireless, Verizon Communications and Vodafone Group.

Major Developments

4G LTE expansion. On January 29, 2013, Verizon Wireless rolled out its 4G LTE coverage to the Pennsylvania counties around Philadelphia; the New Jersey and Delaware shores; and the Lehigh Valley, among other places. Verizon Wireless said its 4G LTE network covers 94 percent of the population in what it calls its Philadelphia Tri-State Region and 89 percent of the population of the country. Verizon Wireless also activated new 4G LTE coverage on three sites in Sullivan County, expanding and filling in coverage on the high-speed data network it launched locally in November 2011. On January 28, 2013, Verizon Wireless reported to expand 4G LTE network in Schoharie County, Greene County, Utica-Rome Area, and Elmira Area. Verizon Wireless continues to be the operator of the nation's largest 4G LTE network.

Spectrum deal. On January 28, 2013, AT&T Inc. (NYSE:T) had entered into an agreement with Verizon Wireless to acquire spectrum licenses. AT&T will shell out $1.9 billion and offer Advanced Wireless Services spectrum licenses in five markets to Verizon, and Verizon will hand over 39 lower 700 MHz licenses to AT&T, covering 42 million people in 18 states including major territories such as Chicago, Los Angeles, and Miami. The deal is expected to close in the second half of 2013. Verizon is parting with the spectrum that it was not using to gather funds for buying a big belt of spectrum from a consortium of cable firms.


After AT&T failed to acquire T-Mobile USA for $39B due to regulatory opposition, AT&T has been eying various spectrum transactions. AT&T also aims to enhance its high-speed wireless network. The company is on track to deploy 4G LTE services as soon as possible to achieve the set target to connect 300 million people in the U.S. by 2014 end.

After Japan's Softbank's deal to acquire a 70% stake in Sprint Nextel Corporation (NYSE:S), U.S. wireless providers are racing to expand the 4G LTE network. AT&T announced "Project Velocity IP," and Deutsche Telekom (OTCQX:DTEGY) plans to speed up its T-Mobile USA's building of a 4G LTE data network in 2013. Verizon Wireless still has by far the biggest 4G LTE network in coverage area and high-spending postpaid customers continue to flow toward Verizon. Almost one-quarter of Verizon's postpaid customers use LTE devices and nearly half of its overall data traffic flows over the speedy 4G network. However, Sprint is expected to spend heavily after Softbank's deal if regulators approve the Softbank-Sprint deal in the spring, which is currently being delayed due to examination by the Justice of Department and the Department of Homeland Security.

In 2012, Verizon spent $8.9 billion on its wireless network, down 1.3% from 2011. Verizon indicated that it isn't raising capital spending in anticipation of Softbank challenge. Verizon's capital sending as a percentage of sales actually fell to 14% in 2012 because the company had done building its FiOS broadband and TV fiber networks.

Key Stats and Valuation Comparison

Vodafone Group

Verizon Communications


Sprint Nextel

Enterprise Value





Operating Cash Flow





Forward Dividend Yield (%)





Profit Margin (%), ttm





Operating Margin (%), ttm





Quarterly Revenue Growth (yoy)





Forward P/E

10.67 (fye Mar 31, 2014)

13.85 (fye Dec. 31, 2014)

12.80 (fye Dec. 31, 2014)


Source: Yahoo! Finance

Technical Analysis

VOD closed at $27.31 with 0.96% gain on January 29, 2013. VOD had been trading in the range of $24.95-$30.07 in the past 52 weeks. VOD has a low beta of 0.70. VOD is technically bullish. The MACD (12, 26, 9) indicator had been showing a bullish trend with diverging MACD difference. The momentum indicator, RSI (14), is showing a strong buying momentum at 67.61. VOD is currently trading above its 50-day MA of $25.76 and 200-day MA of $26.88.

VZ closed at $43.50 with 1.71% gain on January 29, 2013. VZ had been trading in the range of $36.80-$48.77 in the past 52 weeks. VZ has a very low beta of 0.49. The MACD (12, 26, 9) indicator had turned to show a bullish sign on January 28, 2013 and the MACD difference diverged on the last trading day. RSI (14) is showing a bullish lean at 55.63. VZ sliced and closed above its 50-day MA of $43.05 on the last trading day.

Reviewing Options

The last reviewed options play for VOD of Jan., 2013 $25/$27 put did not generate profit but allowed us to acquire the stock at $26.45, as VOD fell below $27 upon option expiration. The stock holding is currently yielding 3.25%. For long-term bullish investors, a credit put spread of Jul. 20, 2013 $23/$25 can be reviewed, which will allow investors to acquire VOD stock at a price below $25 while gaining some upside potential. For VZ investors, a credit put spread of May 18, 2013 $39/$41 can also be reviewed.

Note: All prices are quoted from the closing of January 29, 2013, and all calculations are before fees and expenses. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.

Disclosure: I am long S, VOD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.