Should Verizon Dump Apple's iPhone? (VZ) (AAPL)
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Rating Summary:
45 Buy, 29 Hold, 7 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 14 | Down: 19 | New: 25
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Having Apple's (Nasdaq: AAPL) popular iPhone has proven to be a double-edged sword for wireless carriers. Sure it brings in new subscribers, but not without a cost. Apple charges sky-high subsidies, hurting wireless margins and creating angst among investors. Also, Apple is stealing all the value. Just look at the stock charts of Apple versus the carriers to see this.
Why then should Verizon (NYSE: VZ) continue to offer the iPhone? Analysts at Goldman Sachs said they are getting this question more than ever from investors.
Verizon investors note that the company maintained industry leading metrics without the device. In 2011, Verizon's first year carrying the device, service revenue increased $3.53 billion, the exact same increase as 2010, while subsidies increased by $1.5 billion after declining in 2011.
Despite this, it is Goldman's view that Verizon and other carriers need to remain committed to the iPhone as well as better discipline on upgrade policies.
In 2011, all the major wireless carriers made changes to their upgrade policies. While the changes are a step in the right direct, the question is if they can retain discipline. The carriers discipline on upgrade policies will face an important test with the upcoming iPhone 5. "If carriers can prove discipline through that cycle, then sentiment on the group could improve significantly," Goldman's analyst states.
Goldman continues to favor Verizon in the group for LTE leadership and faster growth, although they note that investors will be guarded with smartphone upgrade mechanics negatively impacting the sector as a whole.
Why then should Verizon (NYSE: VZ) continue to offer the iPhone? Analysts at Goldman Sachs said they are getting this question more than ever from investors.
Verizon investors note that the company maintained industry leading metrics without the device. In 2011, Verizon's first year carrying the device, service revenue increased $3.53 billion, the exact same increase as 2010, while subsidies increased by $1.5 billion after declining in 2011.
Despite this, it is Goldman's view that Verizon and other carriers need to remain committed to the iPhone as well as better discipline on upgrade policies.
In 2011, all the major wireless carriers made changes to their upgrade policies. While the changes are a step in the right direct, the question is if they can retain discipline. The carriers discipline on upgrade policies will face an important test with the upcoming iPhone 5. "If carriers can prove discipline through that cycle, then sentiment on the group could improve significantly," Goldman's analyst states.
Goldman continues to favor Verizon in the group for LTE leadership and faster growth, although they note that investors will be guarded with smartphone upgrade mechanics negatively impacting the sector as a whole.
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