Following its sturdy performance in the third quarter and predictions of smooth sailing in the coming months, analysts generally view Verizon Wireless (NYSE:VZ) as king of the hill in the U.S. wireless industry. What's surprising about this is that Verizon's momentum continues to climb despite the onslaught of inexpensive services from low-cost prepaid carriers and costly smartphones tied to carrier subsidies.
"The gap between Verizon and everyone else is just unbelievable," noted Bill Ho, an independent analyst who has been covering the telecom space for 20 years.
In the third quarter, Verizon reported gains in revenues and margins and its highest net add number in four years (1.8 million retail net connections). Though AT&T Mobility (NYSE:T), Sprint Nextel (NYSE:S) and others reported relatively solid third-quarter figures as well,
So how exactly will Verizon maintain its momentum in the fourth quarter? The carrier appears poised to continue to trumpet the speed and breadth of its LTE network, which now stretches across more than 441 U.S. markets covering some 250 million POPs. Verizon's end-of-year LTE coverage target is 260 million POPs. Verizon's latest ads point out the carrier offers more LTE coverage than all other operators combined.
Verizon also appears to be preparing to more heavily push its prepaid offerings, perhaps to combat competition from new prepaid players. Verizon just last week launched a double data promotion that will increase the data allotment on its $80 prepaid smartphone plan from 1 GB per month to 2 GB. Verizon's focus on prepaid is not surprising; NPD Group recently found that the overall penetration of prepaid smartphones rose from 39 percent in the second quarter of this year to 42 percent in the third quarter.
Click here for a detailed look at wireless carrier performance in the third quarter.
So what are Verizon's competitors doing to catch up? AT&T Mobility announced a major new $14 billion network spending initiative, Project Velocity IP (or VIP), that in part calls for the company to expand its LTE network to 300 million covered POPs by the end of 2014. Sprint Nextel is in the midst of its own $4 billion to $5 billion Network Vision network modernization project, which includes an LTE rollout. And T-Mobile USA this year started its own $4 billion network upgrade program that includes the launch of LTE next year.
Interestingly, some carriers are also hoping for a boost from fourth-quarter tablet sales. "We anticipate a higher number of net adds from tablets in the fourth quarter," AT&T Mobility CEO Ralph de la Vega said on the operator's third-quarter earnings call in October. A major strategic focus of AT&T's new shared data plans is allowing customers to easily add tablets to their wireless bill.
Indeed, Thomson Reuters recently found that one-third of Americans are considering purchasing a tablet during the holiday season--sales that could ultimately boost data revenues for carriers including AT&T and others.
Overall, analysts remain upbeat on the wireless industry: "We have been more positive on the carriers since the beginning of the year when we saw evidence that they were being more disciplined on pricing and promotions. The discipline held through the iPhone 5 launch, contrary to the expectation of many investors. We still believe investors are underestimating the magnitude and sustainability of this trend," wrote New Street Research analyst Jonathan Chaplin in a recent research note. "Telecom is the third best performing sector in the S&P YTD on a total return basis."
FierceWireless carefully follows the quarterly performance of the nation's top wireless carriers. Every quarter, we publish a comprehensive look at the nation's top 10 wireless carriers, including metrics ranging from net adds to average revenue per user.
Click here to see how the nation's wireless carriers performed in the third quarter of 2012.