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Wireless segment drives growth at Verizon

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Verizon’s revenue growing at a decent rate

Verizon Communications Inc.’s (VZ) business consists of the Wireless and Wireline segments. The Wireless segment provides voice and data services to mobile devices. The Wireline segment provides high-speed broadband and video services to consumers and enterprises. It also offers network solutions, data center and cloud services, and looks after the security needs of enterprises.

Verizon’s overall revenues grew by a year-over-year rate of 4.3% in 3Q14. That’s better than the growth rates of AT&T Inc. (T) and Sprint Corporation (S). T-Mobile US, Inc. (TMUS), meanwhile, managed to grow at a faster rate in the last quarter. AT&T’s revenues grew by 2.5%, while Sprint’s revenues declined by 2.3%. In contrast, T-Mobile’s revenue grew by about 10% on a year-over-year basis in the last quarter.

Verizon Wireless vs Wireline

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Wireless segment becoming important for Verizon

Verizon increasingly depends on its Wireless segment for growth. Not only does the Wireless segment contribute more toward Verizon’s overall revenues, it also contributes more toward its margins. As the chart above shows, the Wireless segment contributed 68% as of 3Q14, and its 50% EBITDA (earnings before interest, taxes, depreciation, and amortization) margin was more than double that of the Wireline segment.

Verizon also posted double-digit year-over-year EPS (earnings per share) growth in 10 of the last 11 quarters. This growth in EPS stems in part from the company’s acquisition of Vodafone Group plc’s (VOD) 45% indirect stake in Verizon Wireless. The acquisition was completed earlier this year for $130 billion. At the time, Verizon projected that this transaction would grow its EPS by 10%. For more on this topic, read Must-know: Why 4G adoption and FiOS are driving Verizon’s growth.

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