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Verizon’s Smartphone Sales Drive Its Wireless Equipment Revenues

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Verizon’s device sales in 4Q14

In the previous part of this series, we learned that Verizon’s (VZ) equipment revenues drove the growth of the company’s wireless segment both sequentially and year-over-year in 4Q14. Other wireless telecommunication companies, such as AT&T (T), Sprint (S), and T-Mobile (TMUS), also recorded growth in their equipment revenues during the quarter. In this article, we’ll look at what may have caused such significant growth in these revenues.

Devices such as phones, smartphones, and tablets contribute to wireless telecommunication companies’ equipment revenues. Retail postpaid device activations were responsible for the significant sequential and year-over-year increases in Verizon’s wireless division’s equipment revenues in 4Q14.

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Device activations are driven by Verizon’s smartphone sales

The last quarter was associated with high retail sales largely due to the holiday season. In 2014, the quarter started just after the launch of Apple’s (AAPL) iPhone 6 in September. Although Apple launched iPhones in September, the iPhone 6 was a major launch after the iPhone 5 in 2012. Wireless telecommunication companies started a spate of promotional activities to acquire new customers as well as defend their subscriber base from competitors.

Verizon’s device activations in the postpaid wireless segment increased by ~34% year-over-year in 4Q14. They reached ~15.3 million during the quarter. Phones represented ~85% of these device activations. According to Verizon, new smartphones launched by both Apple and Samsung were responsible for these significant device activations.

If you want to get diversified exposure to Verizon, you can invest in the Technology Select Sector SPDR Fund (XLK). The ETF held ~5% in the company on March 19, 2015.

You can also get more diversified exposure to the company by investing in the iShares Russell 1000 Growth ETF (IWF). This ETF held ~1.8% in the company on the same date.

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