Popularity of Verizon’s Edge plan should grow in 1Q15
In the last part of this series, we learned that Verizon’s (VZ) wireless revenue is expected to increase in 1Q15. Verizon will report its 1Q15 results on April 21, 2015. Verizon expects the popularity of its Edge installment plan to increase in 1Q15.
The telecom expects its Edge take rate, or customers choosing the plan, to increase in 1Q15—compared to 4Q14. As you can see in the above chart, Verizon’s 4Q14 Edge take rate was almost twice the previous quarter. Verizon expects the popularity of the Edge plan to increase for the entire year. The telecom expects a high Edge take rate of 34%–35% for 2015.
Edge will contribute to the wireless segment’s revenue
A high Edge take rate during 1Q15 should support the YoY (year-over-year) growth in the wireless segment’s equipment revenue. The Edge installment billings are monthly recurring revenue streams that go into the wireless segment’s equipment revenue. Verizon’s Edge installment plan is similar to AT&T’s (T) Next and Sprint’s (S) Easy Pay plan. Please read Verizon’s Edge Accounts Continue to Increase to learn more about Edge.
Edge installment billings should support the wireless division’s per unit recurring revenue. Verizon’s estimated postpaid ARPU (average revenue per user) declined ~2.8% YoY in 4Q14. However, the company’s estimated ARPU with Edge billings declined by ~0.4% YoY in 4Q14. We expect Edge billings’ positive contribution to continue in 1Q15.
If you want to get diversified exposure to Verizon, you can invest in the iShares Russell 1000 Growth ETF (IWF). IWF held ~1.8% in the telecom company on March 31, 2015. You can get more diversified exposure to Verizon by investing in the SPDR S&P 500 ETF (SPY). SPY held ~1.1% in the company on the same date.