Verizon Communications Inc. (VZ) plans to initiate 100G (gigabits per second) technology on selected parts of the U.S. network by the end of the second quarter of 2011. The network segments include Chicago to New York, Sacramento to Los Angeles and Minneapolis to Kansas City.
Verizon’s launch of 100G technology in the U.S. will use Juniper Networks Inc.’s (JNPR) routers and CIENA Corp.’s (CIEN) 100G coherent optical transport solution. The network upgrade will increase the speed and bandwidth capacity within Verizon’s US interconnected networks.
Verizon already deployed 100G in some parts of Europe earlier this month. The company is also expected to use Juniper and CIENA equipment for its 100G deployment in Europe this year.
Armed with new technology, Verizon would be able to transmit greater network traffic, which will be 10 times more than the standard route. This will enhance customer confidence in the company’s products and services and will likely lead to subscriber accretion while reducing churn (customer switch).
In the wireless business, Verizon continues to be the market leader in providing wireless voice and data communication services in the U.S. The company is expanding and upgrading its network in order to cope up with the changing dynamics of the telecommunication industry, which is significantly governed by technology innovation.
We believe Verizon’s continued investments in its upgraded broadband network,strong wireless and FiOS services, 4G Long-Term Evolution mobile broadband network, higher smartphones penetration, cloud computing business, and other data devices will lead to improved revenue growth.
However, Verizon is facing cut throat competition particularly from AT&T Inc. (T) and Sprint Nextel Corp. (S). AT&T is the largest U.S. wireless provider in the industry and is in the process to acquire Deutsche Telekom’s unit T-Mobile USA. Post merger, AT&T will become much stronger than Verizon and Sprint.
We believe various technology upgrades and developments along with higher smartphone adoption will enhance the company’s competitive position against its rivals. Further, in early February, Verizon started selling Apple Inc.’s (AAPL) iPhone putting an end to AT&T’sexclusive hold on the device.
Consequently, we are maintaining our long-term Neutral rating on Verizon with the Zacks Rank # 3 (Hold) Rank.
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