Verizon Wireless 2013 Annual Report Download - page 12

receivediscountedmonthlyaccessfeesonMoreEverythingplans.As
of December 31, 2013, Share Everything accounts represented approxi-
mately 46% of our retail postpaid accounts, compared to approximately
23% as of December 31, 2012. Verizon Wireless oers shared data plans
forbusiness,withtheMoreEverything plansfor SmallBusiness and
theNationwideBusinessDataPackagesandPlans.InAugust2013,we
launched the new Verizon Edge device payment plan option which now
allows customers to trade in their phone for a new phone after a min-
imum of thirty days, subject to certain conditions.
On September 2, 2013, Verizon entered into a stock purchase agreement
(the Stock Purchase Agreement) with Vodafone Group Plc (Vodafone) and
Vodafone 4 Limited (Seller), pursuant to which Verizon agreed to acquire
Vodafone’s indirect 45% interest in Cellco Partnership d/b/a Verizon
Wireless (the Partnership, and such interest, the Vodafone Interest) for
aggregateconsiderationofapproximately$130billion.OnFebruary21,
2014, pursuant to the terms and subject to the conditions set forth in the
Stock Purchase Agreement, Verizon acquired (the Wireless Transaction)
from Seller all of the issued and outstanding capital stock (the Transferred
Shares)ofVodafoneAmericasFinance1Inc.,asubsidiaryofSeller(VF1
Inc.),whichindirectlythroughcertainsubsidiaries(togetherwithVF1Inc.,
the Purchased Entities) owned the Vodafone Interest. The consideration
paid was primarily comprised of cash of approximately $58.89 billion and
Verizon common stock with a value of approximately $60.15 billion. See
“AcquisitionsandDivestitures”foradditionalinformation.
In Wireline, during 2013 compared to 2012, revenues were positively
impactedbyhigherrevenuesinConsumerretaildrivenbyFiOSservices.
FiOSrepresentedapproximately71%ofConsumerretailrevenueduring
2013, compared to approximately 65% during 2012. As the penetration
ofFiOSproductsincreases,wecontinuetoseekwaystoincreaserevenue
and further realize operating and capital eciencies as well as maximize
protability. As more applications are developed for this high-speed ser-
vice,weexpectthatFiOSwillbecomeahubformanagingmultiple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, health monitoring, energy
management and utilities management.
AlsopositivelyimpactingWireline’srevenuesduring2013wasa4.6%
increase in Strategic services revenues, which represented 57% of total
Global Enterprise revenues during 2013. However, total Global Enterprise
and Global Wholesale revenues declined due to declines in Core cus-
tomer premise equipment revenues and traditional voice revenues. The
decline in Core customer premise equipment revenues is a result of our
focus on improving our margins by continuing to de-emphasize sales of
equipment that are not part of an overall enterprise solutions bundle.
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 connec-
tions is growing.
We are investing in innovative technology like wireless networks, high-
speed ber and cloud services to position ourselves at the center of the
growth trends of the future. In addition to the Wireless Transaction, since
the beginning of 2012 these investments have included acquisitions
of wireless licenses of $4.9 billion. We also have invested $1.4 billion in
acquisitions of investments and businesses, which we expect will permit
us to oer enhanced machine-to-machine, video and cloud-based prod-
ucts and services.
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 oerings,
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, 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 wireline business
provides consumer, business and government customers with commu-
nications products and services, including broadband data and video
services, network access, voice, long distance and other communica-
tions 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 approximately 176,800
employees as of December 31, 2013.
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 eorts around
higher margin and growing areas of our business: wireless data, wireline
data and Strategic services, including cloud computing services.
Our strategy requires signicant capital investments primarily to acquire
wireless spectrum, put the spectrum into service, invest in the ber optic
network that supports our wireless and wireline businesses, maintain
our wireless and wireline networks and develop and maintain signicant
advanced database capacity.
In our Wireless business, in 2013 compared to 2012, revenue growth
of 6.8% was driven by connection growth and the demand for smart-
phones, tablets and other Internet devices. During 2013, we experienced
a 4.6% increase in retail postpaid connections compared to 2012, with
smartphones representing 70% of our retail postpaid phone base at
December 31, 2013 compared to 58% at December 31, 2012. Also, during
2013, postpaid smartphone activations represented 86% of phones acti-
vated compared to 77% in 2012.
We have substantially completed the deployment of our fourth-gen-
eration (4G) Long-Term Evolution (LTE) network. Our 4G LTE network is
available to 97% of the U.S. population in more than 500 markets cov-
ering approximately 305 million people, including those in areas served
byourLTEinRuralAmericapartners.Our4GLTEnetworkprovideshigher
data throughput performance for data services at lower cost compared
to those provided via third-generation (3G) networks. In December 2013,
69% of our total data trac was carried on our 4G LTE network.
OnFebruary13,2014,weintroducedourMoreEverything®planswhich
replacedourShareEverything® plansandprovidemorevaluetoour
customers. These plans, which are available to both new and existing
postpaid customers, feature domestic unlimited voice minutes, unlim-
ited domestic and international text, video and picture messaging, cloud
storage and a single data allowance that can be shared among up to
10 devices connected to the Verizon Wireless network. Customers with
Verizon Edge, which provides a device payment plan option, also will
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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
VERIZON COMMUNICATIONS INC. AND SUBSIDIARIES