Verizon Wireless 2012 Annual Report Download - page 24

it will begin offering shared data plans for business, with the Share
Everything plans for Small Business and the Nationwide Business Data
Packages and Plans. As of December 31, 2012, Share Everything accounts
represented approximately 23% of our retail postpaid accounts.
In Wireline, during 2012 compared to 2011, revenues were positively
impactedbyhigherrevenuesinConsumerretaildrivenbyFiOSservices.
FiOSrepresentedapproximately65%ofConsumerretailrevenueduring
2012,comparedtoapproximately58%during2011.AstheFiOSprod-
ucts mature, we continue to seek ways to increase incremental revenue
and further realize operating and capital efficiencies as well as maximize
profitability. As more applications are developed for this high-speed ser-
vice,weexpectthatFiOSwillbecomeahubformanagingamultitude
of home services that will eventually be part of the digital grid, including
not just entertainment and communications, but also machine-to-
machine communications, such as home monitoring, home health care,
energy management and utilities management.
AlsopositivelyimpactingWireline’srevenuesduring2012wasa6.3%
increase in Strategic services revenue, which represented 53% of total
Global Enterprise revenues during 2012. However, total Global Enterprise
and Global Wholesale revenues declined as customers continue to be
adversely affected by the economy, resulting in decreased discretionary
spending and delayed purchasing decisions. To compensate for the
shrinking market for traditional voice service, we continue to build our
Wireline segment around data, video and advanced business services—
areas where demand for reliable high-speed connections is growing.
In 2012, we reached agreements with the Communications Workers of
America and the International Brotherhood of Electrical Workers on new,
three-year contracts that cover approximately 43,000 Wireline employees.
The new agreements will expire on August 1, 2015.
During 2012 and 2011, we made several strategic investments to improve
our competitive position:
• In 2012, we completed separate transactions with SpectrumCo, LLC
(SpectrumCo)andCoxTMIWireless,LLCtoacquireAdvancedWireless
Service (AWS) spectrum. We also completed a series of purchase and
exchange transactions for AWS and PCS licenses and a 700 megahertz
(MHz) lower A block license. In addition, during January 2013, we
agreedtosellaportionofour700MHzBblocklicenses,whichupon
receipt of regulatory approval, will result in the completion of our pre-
viouslyannouncedopensaleprocessforallofour700MHzlowerA
and B block spectrum licenses. These transactions will allow us to meet
the continued demand for wireless services.
• OnJune1,2012,weagreedtoacquireHUGHESTelematicsforapproxi-
mately $12 per share in cash for a total acquisition price of $0.6 billion
andwecompletedtheacquisitiononJuly26,2012.Theacquisitionhas
accelerated our ability to bring more telematics offerings to market for
existingandnewHUGHESTelematicsandVerizoncustomers.
• InFebruary2012,weenteredintoaventurewithRedboxAutomated
Retail,LLC,asubsidiaryofCoinstar,Inc.,tooffercustomersnationwide
access to media rentals through online and mobile content streaming
aswellasphysicalmediarentalsthroughRedboxkiosks.InDecember
2012, the venture introduced its product portfolio, which includes
subscriptionservices,underthenameRedboxInstantbyVerizon.
Overview
Verizon Communications Inc. (Verizon or the Company) is a holding com-
panythat,actingthroughitssubsidiariesisoneoftheworld’sleading
providers of communications, information and entertainment products
and services to consumers, businesses and governmental agencies
with a presence in over 150 countries around the world. Our offerings,
designedtomeetcustomers’demandforspeed,mobility,securityand
control, include voice, data and video services on our wireless and wire-
line networks. We have two reportable segments, Verizon Wireless and
Wireline. Our wireless business, operating as Verizon Wireless, provides
voiceanddataservicesandequipmentsalesacrosstheUnitedStates
using one of the most extensive and reliable wireless networks. Our wire-
line business provides consumer, business and government customers
with communications products and services, including voice, broadband
data and video services, network access, long distance and other com-
munications products and services, and also owns and operates one of
the most expansive end-to-end global Internet Protocol (IP) networks.
We have a highly skilled, diverse and dedicated workforce of approxi-
mately 183,400 employees as of December 31, 2012.
In recent years Verizon has embarked upon a strategic transformation
as advances in technology have changed the ways that our customers
interact in their personal and professional lives and that businesses
operate. To meet the changing needs of our customers and address the
changing technological landscape, we are focusing our efforts around
higher margin and growing areas of our business: wireless data, wireline
data and Strategic services, including cloud computing services.
Our strategy requires significant capital investments primarily to acquire
wireless spectrum, put the spectrum into service, expand the fiber optic
network that supports our wireless and wireline businesses, maintain
our wireless and wireline networks and develop and maintain significant
advanced database capacity.
In our Wireless business, in 2012 compared to 2011, strong revenue
growth of 8.1% was driven by connection growth and strong demand
for smartphones and Internet data devices. During 2012, we experienced
a 4.3% increase in retail postpaid connections per account compared to
2011, with smartphones representing 58.1% of our retail postpaid phone
base at December 31, 2012.
AsofJanuary22,2013,ourfourth-generation(4G)Long-TermEvolution
(LTE) network has been deployed in 476 markets covering more than 273
millionpeoplethroughoutthecountry,whichisnearly89%oftheU.S.
population. We expect to continue to deploy 4G LTE during 2013 and
by year-end cover nearly our entire existing 3G network footprint. Our
4G LTE network provides higher data throughput performance for data
services at lower cost compared to those offered by 3G technologies. As
of December 31, 2012, nearly 50% of our wireless data traffic was on our
4G LTE network.
In 2012, Verizon Wireless launched the Share Everything plans, which
were made available to both new and existing postpaid customers. These
plans feature domestic unlimited voice minutes, unlimited text, video
and picture messaging and a single data allowance that can be shared
among up to 10 devices connected to the Verizon Wireless network.
Foranadditionalmonthlyaccessfee,ourcustomershavetheoptionof
sharing long distance and roaming minutes among their devices for calls
fromtheUnitedStatesto,andcallswhilewithin,CanadaandMexico.The
ShareEverythingplansalsoincludetheMobileHotspotserviceonour
smartphonesatnoadditionalcharge.TheMobileHotspotserviceallows
acustomertouseournetworktocreateaWi-Finetworkthatcanbeused
byWi-Fienableddevices.InJanuary2013,VerizonWirelessannounced
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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
VERIZON COMMUNICATIONS INC. AND SUBSIDIARIES