Verizon Wireless 2014 Annual Report Download - page 13

throughput performance for data services at a lower cost compared to
that provided via third-generation (3G) networks. Approximately 84% of
our total data trac in December 2014 was carried on our 4G LTE net-
work.InMay2014,weannouncedthedeploymentofAWSspectrumin
our 4G LTE network. This additional bandwidth, which we refer to and
brand as XLTE, provides additional network capacity and is currently avail-
able in more than 400 markets. Nearly all of the 4G LTE devices Verizon
Wireless currently sells can operate on XLTE.
In February 2014,we introduced our MoreEverything® plans which
replacedour Share Everything®plans.These plans featuredomestic
unlimited voice minutes, unlimited domestic and international text,
video and picture messaging, cloud storage and a single data allowance
that can be shared among multiple devices connected to the Verizon
Wirelessnetwork.AsofDecember31,2014,MoreEverythingaccounts
represented approximately 61% of our retail postpaid accounts com-
pared to Share Everything plans representing approximately 46% of our
retail postpaid accounts as of December 31, 2013. Verizon Wireless also
oersshareddataplansforbusiness,withMoreEverythingplans for
Small business and Nationwide Business Data Packages and Plans.
Wireline
In our Wireline business, revenues decreased 0.5% during 2014 com-
pared to 2013, primarily due to declines in Global Enterprise Core and
Global Wholesale revenues resulting from lower voice services and data
networking revenues as well as the contraction of market rates due to
competition. 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.Wireline’srevenuesduring2014included
a 2.3% increase in Strategic services revenues, which represented 61%
of total Global Enterprise revenues, as compared to 57% of total Global
Enterprise revenues during 2013.
Wireline revenues during 2014 also included increases in Consumer retail
revenuedrivenbyFiOSservices.FiOSrepresentedapproximately76%
of Consumer retail revenue during 2014, compared to approximately
71%during2013.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 appli-
cationsaredevelopedforthishigh-speedservice,weexpectthatFiOS
will become a hub for managing multiple home services that will even-
tually 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 utili-
ties management.
We continue to enrich the customer value proposition by creating new
and innovative services on our FiOS platform. During 2014, Verizon
announcedtheintroductionofFiOSQuantumTV,whichprovidesFiOS
video subscribers with new features, including the ability to record up
to 12 shows at once and control live TV from any room in their home.
ThisnewserviceisnowavailableeverywherethatFiOSTVisoered.With
ourFiOSQuantumbroadbandserviceandcertainotherdataservices,
our residential and small business customers can achieve symmetrical
upload and download speeds of up to 500 megabytes per second, which
werefertoasSpeedMatchsm.
Capital Expenditures and Investments
We are investing in wireless networks, high-speed ber and cloud ser-
vices to position ourselves at the center of growth trends for the future.
During 2014, these investments included capital expenditures of $17.2
billionandacquisitions of wirelesslicensesof$0.4 billion.See“Cash
FlowsUsedinInvestingActivities”andNote2totheconsolidatednan-
cial statements for additional information.
By investing to expand our own capabilities, we are also providing the
communities we serve with an ecient, reliable infrastructure for com-
peting in the information economy. We are committed to putting our
customers rst and being a responsible member of our communities.
Guided by this commitment and by our core values of integrity, respect,
performance excellence and accountability, we believe we are well-
positioned to produce a long-term return for our shareowners, create
meaningful work for ourselves and provide lasting value for society.
Trends
In the sections that follow, we provide information about the important
aspects of our operations and investments, both at the consolidated and
segment levels, and discuss our results of operations, nancial position
and sources and uses of cash. In addition, we highlight key trends and
uncertainties to the extent practicable.
The industries that we operate in are highly competitive, which we expect
to continue particularly as traditional, non-traditional and emerging
service providers seek increased market share. We believe that our high-
quality customer base and superior networks dierentiate us from our
competitors and enable us to provide enhanced communications expe-
riences to our customers. We believe our focus on the fundamentals of
running a good business, including operating excellence and nancial
discipline, gives us the ability to plan and manage through changing eco-
nomic and competitive conditions. We will continue to invest for growth,
which we believe is the key to creating value for our shareowners.
Connection and Operating Trends
In our Wireless segment, we expect to continue to attract and main-
tain the loyalty of high-quality retail postpaid customers, capitalizing
on demand for data services and bringing our customers new ways of
using wireless services in their daily lives. We expect that future connec-
tion growth will continue as we introduce new 4G LTE devices, including
new smartphones and tablets. We believe these devices will attract and
retain higher value retail postpaid connections, contribute to continued
increases in the penetration of data services and help us remain com-
petitivewithotherwirelesscarriers.However,asaresultoftheincreasing
competition within our industry, we expect our churn to increase in 2015.
We expect future growth opportunities will be dependent on expanding
the penetration of our network services, oering innovative wireless
devices for both consumer and business customers and increasing
the number of ways that our customers can connect with our network
and services.
Service and equipment pricing play an important role in the wireless
competitive landscape. As the demand for wireless services continues
to grow, wireless service providers are oering service plans that include
unlimited voice minutes and text messages and a specic amount of
data access in varying megabyte or gigabyte sizes or, in some cases,
unlimited data usage at competitive prices. Some wireless service pro-
viders also allow customers to rollover unused data allowances to the
next billing period and are also oering installment plans that decouple
service pricing from equipment pricing and blur the traditional boundary
between prepaid and postpaid plans. In 2015, we expect that customers
will continue to adopt these installment plans, which also oer discounts
onthecostofwirelessservice.Furthermore,somewirelessproviders
are oering new customers price plans that undercut pricing under the
customer’sserviceplanwithitscurrentwirelessproviderandprovidea
credit to reimburse early termination fees paid to their former wireless
service provider, subject to certain limitations, in addition to promotions
targeted specically to customers of Verizon Wireless. We seek to com-
pete in this area by oering our customers services and equipment that
they will regard as the best available value for the price, as well as service
plans that meet their wireless service needs.
11
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued