How tablets are profitable growth opportunities for Verizon
In the prior parts of the series, we discussed how a quality smartphone lineup is important for Verizon (VZ). We also discussed how the success of Apple’s (AAPL) iPhone 6 would benefit Verizon. However, Verizon also considers tablets as profitable growth opportunities. During the conference call to announce the second quarter of 2014 (or 2Q14) earnings, Verizon’s management mentioned that it added 1.15 million postpaid tablets, compared to only 0.30 million postpaid phone net additions.
Plus, management mentioned that although 4G smartphones provide the highest value, tablets provide good incremental value through lower churn and increased data consumption. Also, tablets have lower cost subsidies compared to smartphones. Management also mentioned that 4G tablets consume more data than 3G smartphones, which pushes up the data consumption at the account level. All these factors make tablets a profitable growth opportunity for Verizon.
Tablet market growth provides opportunity for Verizon
According to a report from eMarketer and as the chart above shows, the number of people in the U.S. using a tablet at least monthly would increase from 132 million in 2013 to 147 million this year. This means nearly half the U.S. population would use a tablet at least once in a month. This growth in tablet use means Verizon has a great opportunity to leverage the large tablet user base.
Tablets are providing growth opportunities not only to Verizon, but also to AT&T (T), T-Mobile (TMUS), and Sprint (S). For Sprint, this opportunity is even more valuable, as the tablets addition is helping it offset the loss of smartphone subscribers that it’s been encountering for years.