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Verizon Offers Motorola Phones

VZ BBRY T

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Verizon Communications Inc. (VZ - Analyst Report) recently announced that it will offer three new Droid smartphones by Google Inc.'s Motorola. The new smartphones – Droid Mini, Droid Ultra and Droid Maxx – will be available in Verizon stores beginning Aug 20, for $99, $199 and $299, respectively, under a two-year contract.

 We believe the company’s new set of smartphones would add to its equipment revenues as well as promote the data services of the company.

Verizon is riding high on smartphones with the introduction of devices that would boost data revenue going forward. The company’s smartphone penetration increased to 61%. It activated 7.2 million smartphones during the first quarter, of which 28% were new users.

The company introduced numerous devices to attract customers to 4G LTE that covers over 28% of its total retail post-paid connections. The new gadgets include Samsung ATIV Odyssey, the BlackBerry (BBRY - Analyst Report) Z10, the Samsung Galaxy Note 10.1 tablet, the Verizon 4G LTE USB Modem UML295 by Pantech, and the Verizon Jetpack 4G LTE Mobile Hotspot MiFi 5510L by Novatel Wireless.

The company’s 4G LTE Router – an Internet access gadget compatible with both wired and Wi-Fi-enabled devices – will likely gain popularity in the near term.

In addition, the company is also bent on providing early smartphone upgrades to customers. The company is offering frequent upgrade of devices to customers willing to pay the purchase price in installments.

With no change in the company’s service pricing, we believe the company will gain from zero subsidies on phone upgrades by offering the part payment facility. The company is spending hugely to subsidize the handsets, which largely remains a drag on its profits.

Verizon, which operates with telecom giant AT&T, Inc. (T - Analyst Report) currently has a Zacks Rank #3 (Hold).

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