verlzon CommunlcaLlons Lconomlc Landscape

uomesLlc 1elecommunlcaLlons SecLor CrowLh, key lndlces, and u.S. MarkeL SLrucLure
!"#$%& ("#)*+%,#-./
(verlzon #3 ln slze ln Lhls lndusLry, ln Lerms of sales)






(verlzon #1 ln slze ln Lhls lndusLry, ln Lerms of markeL share)





Wlreless 1elecommunlcaLlon MarkeL ConcenLraLlon: very Plgh, verlzon Cwnlng 42 of markeL share and
A1&1 ownlng 33. Wlreless replacemenL of landllne phones ln Lhe uS has Lrlpled Lo 32 from 2006-2011, and
wlLh lncreaslng demographlc Lrends of ?-generaLlon and Mlllenlal populaLlons esLabllshlng Lhelr own
households, Lhls replacemenL flgure ls expecLed Lo lncrease.
Maln uomesLlc Challenge: 1he maln challenge for wlreless provlders ln Lhls lndusLry ls markeL saLuraLlon. key
ways Lo grow are by aLLracLlng subscrlbers from oLher carrlers and flndlng nlche under Lapped areas for
growLh. Cne of Lhe few u.S. areas for growLh ls ln rural areas, where 20 of households lack broadband access.




0-1,+*./
1he LelecommunlcaLlons lndusLry ls hlghly dependanL on uS personal consumpLlon. +3.33
annuallzed










ersonal consumpLlon on servlces: +3.6 annuallzed














-u.S. CoporaLe roflLs: +3.6 C3 2012-C3 2013 (3 less Lhan 10 yr. average)

-u.S. CorporaLe proflLs are necessary for sLrong demand for LelecommunlcaLlons servlces. 99 of
lC81unL 1000 companles uLlllze verlzon CommunlcaLlons servlces, Lhus sLrengLh or weakness ln
corporaLe proflLs lmpacLs demand for new or upgraded servlces slgnlflcanLly, whlle sLandard servlces
are less affecLed because of Lhelr relaLlve lnelasLlclLy.

-u.S. ersonal lncome: +2.3 november 2012-2013

-u.S. ersonal lncome ls slmllarly lmporLanL Lo demand LelecommunlcaLlons servlces. Powever, rlses ln
personal lncome musL be seen skepLlcally, slnce Lhe growLh ls malnly seen ln Lhe Lop 3 of households,
who can only use a llmlLed amounL of wlreless LelecommunlcaLlon servlces. 1hus, Lhe ouLlook for
ma[orlLy of Lhe populaLlon shows a decrease
ln personal lncome. Slmllar Lo corporaLe
proflLs, Lhls mosLly hurLs hlgher-end servlces,
whlle sLandard LelecommunlcaLlon servlces
for Lhe ma[orlLy of Lhe populaLlon are seen as
a necesslLy.




-1oLal u.S. revenue for LelecommunlcaLlons: +3.4 ln 2013 C3


2343 56"7*% 4%"8+%8"*/
1he wlreless LelecommunlcaLlons lndusLry ln Lhe u.S. ls hlghly concenLraLed. WlLh 44 of Lhe markeL share,
verlzon wlreless en[oys a key compeLlLlve advanLage resulLlng from economles of scale. 8arrlers Lo enLry
lnclude: hlgh lnlLlal caplLal lnvesLmenL cosLs, excluslve access Lo naLlonal specLrum alrwaves by Lhe Lop four
companles, and a decreaslng long-run average cosL llne (essenLlally, average cosLs for a flrm decrease as slze
lncreases)


9*",:#-;. .%6%*1 #8%<##7 #- %&* 2343 =*<*+#>>8-,+6%,#- 0-18.%"?/

1he u.S. conLlnues Lo be Lhe largesL Lelecom markeL ln Lhe world and ls expecLed Lo grow fasLer Lhan mosL
oLher developed counLrles Lo a LoLal of $721 bllllon by 2013, or 3.7 percenL every year. Powever, Lhe u.S.
share ln Lhe global markeL wlll decrease as developlng naLlons experlence hlgher growLh raLes.
Cn a naLlonal basls, wlrellne volce revenues are expecLed Lo conLlnue Lhelr long-Lerm decllne, whlle Lhe
moblle markeL could grow Lo over $200 bllllon by 2013. PlghllghLlng an overall Lheme ln Lhe
LelecommunlcaLlons markeL, however, wlreless volce revenues are expecLed Lo be flaL Lo sllghLly down ln Lhe
comlng years buL wlll be more Lhan made up by rapld growLh ln daLa revenues Lhanks Lo Lhe adopLlon of
smarLphones and Lhe emergence of machlne-Lo-machlne servlces.
SegmenLed by markeLs, Lhe overall u.S. revenue plcLure shows LhaL more Lhan half of LelecommunlcaLlons
spendlng ls sLlll ln Lhe consumer markeL segmenL, alLhough Lhe general buslness and enLerprlse (large-
buslness and governmenL) markeLs conLlnue Lo grow."

SpecLrum (publlc alrwaves):
verlzon, A1&1, 1-Moblle, and SprlnL face a shrlnklng supply of specLrum llcenses whlle demand ls sharply
lncreaslng. 1he lCC regulaLes Lhls supply and baslc supply and demand Lells us LhaL Lhese specLrum llcenses
are golng Lo lncrease sharply ln prlce, drlvlng up cosLs for Lhe companles. Powever, secondary Lradlng of Lhe
llcenses can be Lraded much llke securlLles, so an lncrease ln specLrum growLh can provlde valuable lncome for
verlzon, who en[oys Lhe advanLage of slLLlng on unused alrwaves, whlle smaller companles llke SprlnL and 1-
moblle are flghLlng Lo aqulre more llcenses Lo expand coverage. 1hls was lllusLraLed when verlzon recenLly
sold an alrwave llcense Lo 1-Moblle for a frequency Lhey no longer used for $3 bllllon, for abouL a 23 proflL.
1hese llcenses addlLlonally explre Lyplcally every 10 years, whlch can lead Lo new purchases LhaL could be
slgnlflcanL Lowards a company's boLLom llne.
Clobal CrowLh and 1rends

-Worldwlde SecLor growLh ls pro[ecLed Lo grow
from 21rllllon currenLly-------->2.7 Lrllllon by 2018,
or 23.9

verlzon's Wlrellne segmenL provldes cusLomers
wlLh communlcaLlon servlces, lncludlng volce,
broadband vldeo and daLa, neLwork access, long
dlsLance, and oLher servlces, Lo resldenLlal and
small buslness cusLomers and carrlers, as well as
nexL-generaLlon l neLwork servlces and
communlcaLlons soluLlolns Lo medlum and large
buslnesses and governmenL cusLomers globally.
verlzon Wlrellne accounLed for 39.2 bllllon ln revenues ln 2013. lL operaLes ln over 123 dlfferenL counLrles
across Lhe globe, mosLly provldlng prlvaLe l servlces Lo buslnesses. 1he growLh of emerglng markeLs provldes
abundanL room for growLh necessary for verlzon Lo expand ouL of a saLuraLed u.S. markeL. lorelgn ulrecL
lnvesLmenL (lul) lncreased 11 ln 2013, and desplLe recenL Lurmoll ln cerLaln counLrles, Lhe unlLed naLlolns
Conference on 1rade and uevelopmenL sLlll predlcLs lul Lo grow 1.6 Lrllllon nexL year, and 1.8 Lrllllon ln 2013.
8y merglng wlLh MCl ln 2006, verlzon has poslLloned lLself globally Lo Lake advanLage of buslness growLh ln
emerglng markeLs. Whlle domesLlcally, Wlrellne alms Lo plck up revenues by offseLLlng lowerlng demands
volce demands wlLh an upLlck ln llos 8roadband servlces, Lhe growLh ln Wlrellne's revenue abroad wlll have Lo
generaLed by an lncrease ln demand for lL's verlzon 8uslness deparLmenL. 1hls expanslon, however, wlll only
lncrease revenues ln one porLlon of wlrellne, whlch ls only abouL 1/3 of Lhe overall company.
Many large companles ln developed economles are seeklng global growLh ln emerglng markeLs. ln order Lo
Lhrlve, companles wlll need aL leasL baslc communlcaLlon, and broadband servlces ln order Lo compeLe.
verlzon has esLabllshed lLself Lo provlde Lhese servlces Lo buslnessses ln emerglng markeLs, ln counLrles
focused ln CenLral and SouLh Amerlca (Lhrough lLs purchase of 1erremark Worldwlde), selecL Mlddle LasLern
counLrles, and Lurope, and Afrlca. 1hus, Wlrellne's non-domesLlc long-Lerm growLh and expanslon ls parLlally
dependanL on buslness' expandlng lnLo Lhese developlng economles, and lLs ablllLy Lo poslLlon lLself globally Lo
be able Lo provlde LelecommunlcaLlons servlces Lo Lhese buslnesses need.
ln facL, much llke energy and waLer, LelecommunlcaLlons servlces ls a necesslLy for emerglng economles Lo
even grow aL all.
1elecommunlcaLlons faclllLaLes
soclo-economlc advancemenL
and ls a crlLlcal uLlllLy for
economlc developmenL.
llnally, developlng world
lnLerneL usage has lncreased
rapldly over Lhe lasL 6 years,
from 13 ln 2008, Lo
predlcLlons of 31 ln 2014.

Clobal growLh concluslon: Whlle verlzon has poslLloned lLself Lo Lake advanLage of an evenLual lncrease ln
global buslness communlcaLlons servlces demand, lL has noL made moves Lo expand lLs wlreless segmenL of
Lhe company lnLo emerglng markeLs. 1hls could drasLlcally llmlL Lhe opporLunlLy global growLh possesses for
an lncrease ln revenue drlvln by developlng economles. SepLember reporLs have lndlcaLed LhaL verlzon ls
conslderlng more lnLernaLlonal expanslon, buL no sLraLeglc plan has been released.





8egulaLory and CovernmenLal AspecLs

("*..8"* @#" #A*- 6++*.. "*B8,"*>*-%./
Cellular provlders offer phones meanL only Lo work wlLh Lhelr own neLwork. 1here has been lobbylng
by consumer acLlvlsLs and manufacLurers Lo be able Lo selecL any quallfled devlce and have lL operaLe
wlLh Lhe neLwork called open access. 1hls would allow consumers Lo swlLch beLween provlders on Lhelr
slngle devlce, lncreaslng cusLomer churn" and decreaslng Lhe Lrend for excluslvlLy conLracLs beLween
phone brands and wlreless provlders.

C4D E*F*<#A>*-%./
WlLh Lhe unravellng of Lhe nSA debacle, lL wlll be lmporLanL Lo keep an eye on Lhe relaLlonshlp
beLween phone companles and Lhe agency, whlch apparenLly pald ouL hundreds of mllllons Lo each
company. Whlle Lhls ls a relaLlvely low fracLlon of revenue, Lhey may be requlred Lo evenLually sLore
cusLomer daLa for up Lo flve-years-someLhlng lndusLry experLs clalm Lhe companles are adamenLly
agalnsL because of Lhe rlsk for lawsulLs, compllcaLlons leadlng Lo hlgh cosLs, and securlLy breaches LhaL
lead Lo large lnvesLlgaLlolns and negaLlve publlclLy.

G6H#" 2-,#- I*B8,"*>*-%./
A large porLlonln of wlreless labor force ls represenLed by unlolns. 1hls has hlsLorlcally caused frequenL
sLoppages upon Lhe explraLlon of labor conLracLs. unless companles and unlons qulckly reach
agreemenL on new conLracL Lerms, such sLoppages can le ad Lo revenue loss and cusLomer loss.














SmarL phone ownershlp ls
drasLlcally lncreaslng, whlch
ls good for growLh ln
verlzon's wlreless dlvlslon
verlzon hlghly subsldlzes Lhe sale of
lphones, Lhe lncrease ln Lhelr
domesLlc sale ls crlLlcal. lL's
lmporLanL LhaL Apple susLalns a Lop
poslLlon among moblle vendors.
lalllng shorL of lphone sales by 4
mllllon ln 2013 ls noL a good
lndlcaLor for verlzon.
Worldwlde Moblle hone
shlpmenLs have grown
conslsLenLly over Lhe pasL 3
years, and ls pro[ecLed Lo
grow even more ln 2014
1he growLh of L-commerce wlll
necesslLaLe a demand for
verlzon Wlrellne buslness
soluLlons servlces LhaL lnclude
L-Commerce servlces.