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Verizon Edge: Growth Is Expected in the Plan’s Take Rate in 2Q15

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Anticipated 2Q15 growth in the take rate

In the last part of this series, we learned that Wall Street analysts expect Verizon’s (VZ) wireless segment revenue to rise moderately YoY (year-over-year) in 2Q15. We also learned that equipment revenue drove the wireless segment’s YoY revenue growth in 1Q15. The growing popularity of Verizon’s installment plan—Edge—positively contributed to the surge in its equipment revenue in 1Q15. Verizon expects the phone activations on its Edge plan to rise significantly during 2Q15.

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Rising popularity of Verizon’s Edge plan

As you can see in the above chart, Verizon’s Edge take rate—customers choosing the plan—rose significantly from a low ~12% in 3Q14 to ~39% in 1Q15. Even with the rising popularity of installment plans in the US wireless industry, the telecom company’s take rate on the Edge remained low until the end of 3Q14.

The Edge plan’s take rate was the lowest compared to the installment plan take rates of AT&T (T) and Sprint (S) during 3Q14. These installment plans included AT&T Next and Sprint Easy Pay.

Verizon focused on improving the adoption rate of its installment plan in 4Q14. Its Edge take rate almost doubled sequentially during the quarter. The launch of Apple’s (AAPL) iPhone 6, just before the beginning of the quarter, also facilitated the surge in the Edge’s take rate during 4Q14.

Verizon continues to focus on tapping the high demand for installment plans in US wireless space. The company expects phone activations on the plan to rise to around 50% in 2Q15.

About Verizon’s Edge plan

With Verizon’s Edge plan, customers can buy a device on 24 monthly installments. On this plan, customers can purchase a device without any upfront payments. However, this is based on some credit requirements that the customers have to fulfill. Edge customers also get the option to upgrade their devices based on certain conditions.

Edge’s monthly installments contribute to the company’s wireless segment’s equipment revenue. The expanding adoption of Edge is positively impacting the growth of the equipment revenue of Verizon’s wireless segment.

You can get diversified exposure to Verizon by investing in the iShares Russell 1000 Growth ETF (IWF). The ETF held ~1.70% in the telecom company on June 30, 2015. However, if you want to further diversify your risk originating from exposure to Verizon, consider investing in the iShares Russell 1000 ETF (IWB). Verizon contributed to ~0.90% of IWB’s holdings on the same date.

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