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The largest wireless carrier in the U.S., Verizon Communications Inc. (VZ - Analyst Report) announced that it will use the small cell products of its existing equipment vendors Ericsson AB (ERIC - Analyst Report) and Alcatel Lucent (ALU - Analyst Report) to deploy small cells on its 4G network. Verizon intends to rollout small cells from the second half of 2013.

Currently, Verizon is the largest LTE (Long Term Evolution) service provider in the U.S. covering almost 497 markets, which represents almost 95% of its total 3G footprint. The company, which currently uses 700 MHz, plans to finish its initial 4G deployment by the middle of 2013 and will use its AWS (Advanced Wireless Services) spectrum to improve its LTE capacity subsequently.

Verizon initially plans to install 200 small cell sites in 2013 using its AWS spectrum. However, the New York-based company plans to broaden its small cell capacity in the next year. Closest rival AT&T Inc. (T - Analyst Report) also plans to deploy 40,000 small cells by 2015.

The largest telecom, OEM Ericsson will provide micro RRUS (Remote Radio Unit) small cells to Verizon, which works well with any baseband unit of its 6000 Radio Base Station (RBS) products. Alcatel Lucent has not divulged any technical details about the small cell technology it will offer to Verizon.

Verizon has stated that the small cells will be used to augment its existing 4G LTE network and will primarily concentrate on high traffic locations like a business district or a shopping mall. Verizon expects that the small cells will increase its voice capacity and data speeds and will complement its current LTE infrastructure. However, providing emergency power backup remains a major headwind for small cells.

The rollout of small cells is rising because of the inconvenience of installing large towers in inaccessible areas. Infonetics forecasts a small cell market of around $2.7 billion by 2017 and expects 4G small cell deployment to overtake 3G by 2015.

We believe that the rollout of small cells will not only increase its coverage and capacity but will also be instrumental to the carrier’s goal of delivering superior voice quality when it will commercially launch its VoLTE (Voice over LTE) service.

Currently, Verizon carries a Zacks Rank #3 (Hold).

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