This telecom stock has the most extensive LTE network and 3G coverage, is well positioned to initiate pricing disruption within the its peer group of telecom stocks. In the long run, we feel the pricing strategy is positive for Verizon (NYSE:VZ) as it puts the company in a position to rake in the profits from increasing data usage and removes the risk of voice plan erosion.
Last week this telecom stock announced the details on its shared data plan, called " Share Everything "; which simplifies pricing for the consumer. All devised will have unlimited voice and text in addition to a shared data bucket. The monthly access fees for smartphones, basic phone, netbooks/USB modems, and tablets are $40, $30, $20 and $10. Data is priced in $10 increments, starting at $50 for 1 GB and graduating to $100 for 10 GB.
Voice and text plans for this telecom stock have been repackaged in a way that better aligns this stock's revenue to its cash costs over the long term. New plans could be slightly dilutive under certain scenarios, but not all. However, the long term benefits from this action are extremely positive to revenue and cash RIOC, in our opinion.
We feel this move by Verizon is a brilliant move that will likely be followed quickly by AT&T (NYSE:T) and should benefit the industry over the long term as carriers will now be able to diminish the trial risk from wholesale and IP based voice plans.
Heavy voice plan users, previously paying a base of $119.98 and $49.99 per additional line for unlimited minutes will be very happy with the new plans as they will now receive unlimited minutes for a much lower access fee of $40/smartphone or $30/smartphone.
Our analysis shows that most VZ smartphone users are not reaching the 2 GB storage data cap; the Share Everything plan allows more devices to pull from a smaller data bucket, which will likely increase the speed of decline in average revenue. Based on our estimate of delivery costs of ~ $7.00/GB we see LTE data remaining profitable even in high usage buckets of 10 GB at $10/GB.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.