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Dynamics of Verizon’s Wireless Data Traffic

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Verizon’s wireless data traffic

During the Wells Fargo Technology, Media, and Telecom Conference held on November 10, 2015, Verizon’s (VZ) chief financial officer Francis Shammo highlighted some aspects of the growth of traffic on the telecom (telecommunication) company’s wireless network.

Shammo said, “You are now seeing people by up in more buckets. And of course, with the shareable plan and with some of the things that we are launching around the usage, if you look at just the video consumption on the handset, our data growth is 75% year over year on the 4G LTE network and it’s handling 87% of the data traffic.”

Increasing penetration of 4G LTE (fourth generation long-term evolution) devices among subscribers is a driver of wireless traffic for US wireless players. The top four US wireless players are Verizon, AT&T (T), T-Mobile (TMUS), and Sprint (S).

During 3Q15, the proportion of 4G LTE devices in Verizon’s postpaid segment continued to rise. As you can see in the above chart, penetration of these devices in the postpaid segment rose from ~59.3% in 3Q14 to ~76.2% in 3Q15.

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Margins in wireless data traffic

During the conference, Shammo also highlighted the impact of overall 3G (third generation) to 4G LTE cost efficiencies. He mentioned that compared to 3G, lower cost per megabit of data on the 4G LTE network is positively affecting margins despite a fall in data service revenue per megabit.

Instead of taking direct exposure to Verizon’s stock, you may choose to take diversified exposure to the telecom company by investing in the iShares MSCI USA Minimum Volatility ETF (USMV). The ETF held ~1.4% in Verizon at the end of September 2015.

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