Tablet growth in the US
Recently, Verizon (VZ) commented on tablets—one of the growth drivers of its wireless business. Verizon’s CFO and executive vice president, Fran Shammo, said, “But you are going to still see a steady growth in tablets in the industry, I believe. I don’t think it’s going to slow.” He also said, “There is still a lot of room for tablet. I think that is going to be — as I said before, that is going to continue to be a growth engine for the industry for the next two to three years.” He spoke about this at J.P. Morgan’s Global Technology, Media and Telecom Conference held on May 19, 2015.
Tablets, like Apple’s (AAPL) iPads, are indeed a growth driver for wireless carriers in the US. Based on Cisco’s (CSCO) Mobile VNI (Visual Networking Index) Forecast, the growth in mobile-connected tablets is expected to continue to outpace smartphone growth in the US.
According to the forecast, the US smartphone subscriber base increased by 22% YoY (year-over-year) to 227 million in 2014. However, mobile-connected tablets in the US grew at a significant ~50% YoY to ~15.6 million in 2014.
According to Cisco’s VNI Forecast, mobile-connected tablets in the US are expected to grow at an average growth rate of ~24% in the 2014–2019 period. This rate is significantly higher than Cisco’s projected average growth rate forecast of ~7% for US smartphones during the same period.
Ample room for tablet growth for Verizon
For Verizon, the smartphone penetration was ~80% of its postpaid phone base in 1Q15. However, tablet penetration in the postpaid segment stood at a low ~9% of the postpaid subscriber base at the end of the quarter. According to the company, tablet penetration may increase to the high range of 50%–60% in the long term.
To get diversified exposure to Verizon, you can invest in the Technology Select Sector SPDR Fund (XLK). XLK held ~5.1% in Verizon on April 30, 2015.
You can get more diversified exposure to Verizon by investing in the SPDR S&P 500 ETF (SPY). SPY held ~1.1% in Verizon on the same date.