Verizon Wireless of Verizon Communications Inc. (NYSE: VZ) has once again topped quality analysis that reflects its growing infrastructural strength. In a wireless network quality study conducted by J.D. Power in the Southwest Region including Oklahoma, Arkansas, Texas, Kansas and Missouri, Verizon topped the list among other national wireless service operators. We believe that the company's leading performance metrics in the wireless business are accretive to its subscriber base and offers a competitive advantage.
Early this month, Verizon also topped the RootMetrics network performance study, in which it scored 89.7 in a scale of 100 for its network speed, call quality, and data and text messaging services.
AT&T Inc. (NYSE: T) has come a close second in the J.D. Power study with a score of 86.2, while Sprint Corp. (NYSE: S) and T-Mobile US Inc. (NYSE: TMUS) have scored 68.2 and 64.3, respectively.
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Verizon has a strong foothold in the wireless business and continues to capture additional market share via robust deployment of the 4G Long Term Evolution (LTE) network. This leads to improved operating and capital efficiency. The company is leading the industry in terms of 4G deployment. As of Dec 31, 2013, it covered 500 markets and more than 305 million people.
While Wireless continues to outperform, the Wireline business still continues to be a drag on Verizon's financials. The company's wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. These are weighing on the company's revenues and margins.
In order to make it profitable, Verizon is making significant investments and is streamlining its cost structure. It remains unclear if and when a reasonable return can be achieved from such investments. Further, Wireline revenue trends would remain challenging over the next couple of quarters due to the company's actions to improve profitability. Product rationalization and process simplification initiatives would dilute profits in the short term.
Verizon currently has a Zacks Rank #3 (Hold).
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