Zacks_Analysts' Blog : Verizon to Sell 4G Handsets - Analyst Blog

Verizon Wireless, a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group (VOD), will sell Motorola Inc.’s (MOT) smartphones in 2011 supported by its fourth generation (4G) network. In October, the company stated its intention to introduce six 4G devices in January 2011, including smartphones and tablets.

Verizon started deploying its high-speed Long-Term Evolution or LTE network earlier this month with average download speed more than five-times faster than the company’s 3G network. However, Verizon does not have any handset that can support these LTE services now.

The company expects the 4G LTE network to be available in 39 major metropolitan areas and in more than 60 commercial airports by the end of 2010, and cover virtually all of its current nationwide 3G footprint by the end of 2013. In terms of 4G network deployments, Verizon is way ahead of its bigger rival AT&T Inc. (T), which is expected to roll out its 4G services in mid-2011.

We believe Verizon’s continuous investment in its broadband network, strong wireless and FiOS services, share gain in the retail post-paid market and increasing smartphone penetration and other data devices will make the stock attractive in the long term.

Further, the launch of 4G network and the expected sale of Apple Inc.'s (AAPL) iPhone starting in January 2011 will boost the company’s growth prospects. Verizon also remains committed to offer incremental returns to its shareholders via dividends and by leveraging a healthy free cash flow.

However, persistent erosion in access lines, high promotional and restructuring expenses, and intense competition from cable companies and other alternative service providers may lead to downside risk for the stock. The 4G infrastructure may also be an obstacle if other service providers shift to different generation technologies.

We are currently maintaining our long-term Neutral rating with the Zacks Rank # 3 (Hold) Rank.