Verizon Reports Growing Wireless Segment Revenues in 4Q14 (Part 4 of 18)
Verizon’s postpaid upgrades
In the earlier parts of this series, we learned that Verizon’s (VZ) device sales volume increased significantly in 4Q14. Also, new smartphone launches from Samsung and Apple helped increase the company’s device activations during the quarter. We also learned that the quarter was good for Verizon in terms of customer additions despite high competition among wireless carriers such as AT&T (T), Sprint (S), and T-Mobile (TMUS).
Here, we’ll look at Verizon’s postpaid upgrades this quarter. This metric is a significant indicator of customer retention by telecommunication companies. In periods of high sales volume, such as 4Q14, the customers of wireless carriers are more likely to switch to other carriers due to a variety of promotional incentives. However, Verizon’s postpaid upgrades increased both sequentially and year-over-year during the quarter.
Verizon’s postpaid upgrades drove smartphone activations
Verizon’s postpaid upgrades increased significantly year-over-year to ~9.8% in 4Q14. As you can see in the chart above, postpaid upgrades stood at ~7.4% in 4Q13. According to the company, postpaid upgrades drove phone activations during the quarter. They represented three-quarters of total phone activations during the period. 4G smartphones dominated these upgrades.
According to Verizon, ~78% of these upgrades included high-value and high-quality customers. They included customers migrating from basic and 3G phones to 4G phones. These upgrades also included Verizon’s ~3.2 million out-of-contract customers using Apple’s (AAPL) iPhones. The company’s management had earlier talked about these customers in its 2Q14 earnings call.
If you want to take on diversified exposure to Verizon, you can invest in the Technology Select Sector SPDR Fund (XLK). The ETF held ~5% in the company on March 19, 2015.
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