iPhone 5 Will Further Hit Verizon's Margins
In a previous report, we had argued that the stocks of Verizon Communications (VZ) and AT&T Inc. (T) are attractive, not because they are growth stories, but because they are offering high dividend yields in the current low-yield environment. Verizon currently offers a high dividend yield of 4.6%, which compares very well to the current 10-year treasury yield of 1.67%. However, it must be a worrying sign for investors when these telecoms display fluctuations in their margins due to a product launch (iPhone 5).
Verizon Communications Inc. has been partnering with Apple (AAPL) to sell its products since the start of 2011, and now with the recent launch of the iPhone 5, it is one of the three carriers that will carry it apart from AT&T and Sprint Nextel Corporation (S). Verizon has announced that it will offer the new iPhone from September 21, with the 16GB model going as low as $199 on a two-year contract.
What is interesting is that the new iPhone has 4G LTE capability, which is both good and bad news for Verizon. It will work well for Verizon in that the company has been building its 4G LTE network for quite some time now. AT&T is also aggressively expanding its 4G LTE network; however, it is still behind Verizon in that regard. Currently, Verizon's 4G network covers over 300 markets, with expectations of covering more by the end of this year. Obviously, Verizon is the clear winner here as it has more coverage than its other rivals, and as iPhone users demand better speeds, it will likely attract more customers to join its network. Interesting to note will be the churn the three carriers report for the third quarter. READ FULL ARTICLE HERE