Verizon’s Internet of Things
In this part of the series, we’ll look at a small but growing revenue segment for Verizon (VZ). The growth trend in Verizon’s IoT or Internet of Things revenue continued in 3Q15. Sequentially, the revenue from this segment rose ~6.1% to reach ~$175 million during the quarter. In the initial nine months of 2015, this stream has helped Verizon make ~$495 million in revenue.
In 2014, the annual revenue from this component had increased ~45.2% year-over-year to reach ~$585 million.
US wireless carriers—including Verizon, AT&T (T), Sprint (S), and T-Mobile (TMUS)—are expected to benefit from the growth of the IoT in the medium term. As per Cisco (CSCO) VNI Forecast, machine-to-machine modules that are mobile-connected are expected to increase at an average annual rate of ~65.8% for 2014–2019 in the United States.
Verizon is boosting its average revenue per user from its IoT business by new monetizing opportunities with services such as Hum. During the 3Q15 earnings conference call on October 20, 2015, Fran Shammo, Verizon’s CFO and EVP, talked about the service.
He said, “In August, we announced the commercial availability of hum, an aftermarket vehicle technology and subscription service creating a connected car driving experience that can operate in more than 150 million vehicles in the United States.”
Currently, the company is offering this service at a monthly price (before taxes) of $14.99 for the initial vehicle and at a unit monthly rate of $12.99 for a maximum of three more vehicles.
Instead of taking on direct exposure to Verizon’s stock, you may take on diversified exposure to the telecom company by investing in the SPDR Dow Jones Industrial Average ETF (DIA). The ETF invested ~1.9% of its portfolio in the telecom company at the end of August 2015.