Tomahawk, WI 03/28/2014 (Basicsmedia) – The $130 billion Verizon Communications (NYSE:VZ) spent to buy out the 45% stake of Vodafone Group Plc (ADR) (NASDAQ:VOD) in Verizon Wireless has clearly increased the debts that Verizon has on its balance sheet.

Financial Picture Still Looks Good

But the buyout of Vodafone will help Verizon Communications (NYSE:VZ) as it will get additional revenue which will go towards repaying that debt and will add about 10% to the company’s EPS. Verizon hopes for revenue growth in 2014.

Verizon has gone from negative net income in December 2012 to positive net incomes in all the succeeding quarters since then. However, Verizon’s margins are likely to be under pressure because of intense competition in the wireless market. The proposed merger of US Sprint Corporation and T-Mobile US Inc (NYSE:TMUS) will create competition for Verizon and AT&T Inc. (NYSE:T). Sprint by itself is also capable of posing a threat to Verizon’s profitable wireless segment.

Best 4G LTE Network

Verizon Communications (NYSE:VZ)’s revenue is growing on the backs of the growth of its wireless segment which offsets the decline in its wireline segment. Verizon Communications (NYSE:VZ) had 11.5 million postpaid activations in 4Q2013 which comprised of 8.8 million smartphones. Around 44.1% of connections were related to devices with the latest 4G LTE technology. Verizon has the best 4G LTE network in the U.S. and this will help the company provide superior service in this growing segment of the wireless business.

Growing Data Traffic Over Wireless

In the U.S., data traffic over wireless networks doubled during 2011-12 and it’s expected to keep growing; especially, data traffic generated via smartphones. The rising numbers of wireless subscribers and growing data traffic from smartphones will definitely help Verizon add to its revenue. With Verizon’s ongoing robust capital expenditures to build a superior network to improve customer experience in terms of connection reliability (no dropped calls), Verizon is well positioned to remain a premium provider of wireless services.

Price Wars

The only risk remains the possibility of price wars from the likes of T-Mobile which will squeeze Verizon Communications (NYSE:VZ)’s margins if it’s forced to respond to these challenges as it recently did by announcing $10 and $20 discounts on customers’ family plans depending on whether their data plans were less than eight gigabytes or more than 10 gigabytes.

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