By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Bedminster, N.J. – Verizon Communications CFO Fran Shammo, sounding off on a variety of wireless issues during a conference call with financial analysts, said the company plans to offer some sort of financing option to smartphone purchasers who want to buy an unsubsidized smartphone without a contract.
Shammo also said Verizon Wireless isn’t interested in creating prepaid sub brands as its three national competitors have, isn’t interested in competing with AT&T to buy no-contract carrier Leap Wireless, and has enough spectrum on hand to last three to four years.
Details and a launch date of the handset-financing option weren’t announced, but Shammo said the launch would build on the launch in 2012’s fourth quarter of an installment plan for cellular-equipped tablets.
In response to a question, Shammo said the company found through market research that “customers want other options” to buying subsidized phones under two-year contracts or paying the full cost of an unsubsidized phone up front, he said. Consumers who want to stay on the edge of technology want to upgrade sooner than they do now, he noted.
In response to a question about the carrier’s prepaid strategy, Shammo said Verizon sees “no need for a secondary prepaid brand” because it “would not help out the overall brand.” Shammo reiterated the company’s strategy even though AT&T recently launched the Aio Wireless prepaid brand and plans to acquire Leap Wireless and maintain Leap’s Cricket prepaid brand. T-Mobile and Sprint pursue similar prepaid sub-brand strategies.
“We’re very happy with how we approach [prepaid],” Shammo said. The carrier sells only 3G prepaid service under its own brand to “keep the 3G network as full as possible” to deliver a “high contribution margin.” Verizon also pursues the lower end prepaid market through resellers, he said.
“We’ll become more aggressive over time” with Verizon-branded 3G prepaid service, noting that the company already changed pricing plans in the past two quarters.
In response to a question about network capacity, Shammo said Verizon is “in good shape for three to four years” in the amount of spectrum it has and doesn’t need to purchase Leap Wireless or make other major spectrum acquisitions in the short term, though it will participate in TV-spectrum auctions targeted to begin in 2014, he said. Although the company buys spectrum every quarter in small markets, Verizon is concentrating on the TV-spectrum auctions to add to its spectrum holdings to meet future demand for wireless data, Shammo said.
To expand network capacity, Verizon is accelerating the rollout of LTE in its AWS (1.7/2.1GHz) band and can also “take slivers of CDMA and reallocate it to LTE” on an as-need basis, he said. Verizon, he stressed “is not interested” in bidding for Leap.
To underscore the need for added LTE capacity, Shammo pointed out that 59 percent of the carrier’s data traffic runs over its LTE network and that LTE traffic is driven by only 33 percent of the carrier’s subscriber base.
LTE is five time more efficient than Verizon’s CDMA 3G network, he noted.
Regarding the company’s planned launch of VoLTE (Voice-over-LTE) technology, Shammo said the company is on track to test its first VoLTE handset at the end of the year and is on track to commercially launch service sometime in the first half of 2014.
With VoLTE, the carrier will send voice as packet data over LTE instead of over a dedicated CDMA voice circuit, freeing up capacity in the network and enabling new services.
In rolling out VoLTE, Verizon will be careful not to launch VoLTE service until its LTE footprint, now at 99 percent of its CDMA footprint, completely matches its CDMA footprint, Shammo said. An extensive LTE footprint is needed because “a VoLTE call is not backward-compatible with CDMA,” and as a result, a VoLTE call will drop if the VoLTE phone moves out of LTE coverage, he explained.
The carriers still plans by the end of 2014 to offer a VoLTE phone that lacks CDMA, Shammo said. VoLTE-only phones will help reduce handset costs and help Verizon lower its phone subsidies, he previously said.
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