Verizon Communications (VZ)

On June 29, Bloomberg reported that Verizon will start carrying Apple's iPhone in January 2011. Verizon customers, who numbered 92.8 million at the end of the first quarter of 2010, may buy 3 million iPhones a quarter, according to analyst estimates. Apple's suppliers have been ramping up production of components for a phone on Verizon’s CDMA network.

The iPhone has helped AT&T add subscribers even as the U.S. mobile-phone market nears saturation. In the first three months of this year, about a third of AT&T’s iPhone activations came from customers who were new to the carrier. Without those 900,000 new subscribers, the company may have posted a loss in contract customers that quarter.

With the iPhone due out on the Verizon network in January 2011, Verizon customers may delay their upgrades in anticipation of the iPhone, and AT&T users may switch to Verizon for the better coverage offered by Verizon. This is good news for Verizon, but it may hurt its competitors such AT&T, and Apple's competitors, such as Motorola and Research in Motion.

I have been waiting for three years to buy an iphone on the Verizon Network. Each year has its delays with APPL/VZ.

I don't this Verizon will sell Iphone until Summer of 2011.

Verizon Wireless acquired rival Alltel for $28.1bn, only $5.9 of which they had to come up with in cash. The purchase includes a deal to take over $5bn of bridge loans (associated with Alltel's private buyout last year) at a discounted price. This lowers the cost of retiring Alltel's debt, which can be refinanced at today's lower rates, while boosting VZ's subscriber base by 13 million to more than 83 million customers, surpassing AT & T.

So when Americans emerge in a future where cell phones will be open, customizable and feature-plentiful on a seemingly level playing field, how does a carrier win? It's simple, have a bigger stick than the other guy! And in the world of mobile phones, that means more subscribers on better, faster networks. Verizon's got the network part down, but was playing second fiddle to AT&T when it came to US subscribers. With this deal, not any more. Combining Alltel's base with Verizon's will make VZ the biggest carrier in the US, couple that with it's recent win in the 700Mhz Spectrum auction and Verizon is looking to secure the face of the Wireless Nation for the next 10 years.

Alltel was taken private just last May at a price tag of roughly $27.5Billion on a combination of debt, equity and a tremendous amount of leverage. It seems the private equity partners, TPG and Goldman Sachs Capital Partners, were looking to make a quick buck here and get out while they could with even the slightest of profit, even though at current levels Verizon would be paying a reported 8 times earnings, while last year's private deal fetched 9.2 times.

It now has a whole new database of addresses to send letters to recommending an upgrade of existing Internet and Television connections to Verizon's high speed FiOS, the fiber optic solution VZ has spent tons of time and even more money rolling out across the country.

Verizon Wireless generates more revenue than any other US wireless carrier and is the clear leader in the industry. The firm continues to add millions of new customers each year, and its customers are the most loyal in the business.

The company is quietly moving into place its next generation network to support light speed service to its wireless users. This combined with its fixed line infrastructure will allow Verizon to enter markets that were not traditionally served by Verizon now Frontier. This said, Verizons next generation network will provide the ability of consumers to capitalize on the bandwidth provided by 4G application base. Steaming vidio to handsets, laptops and maybe even residential if Verizon has its sights set that high?

Verizon won the auction from FCC to valuable spectrum freed up from the DTV transition. This spectrum will penetrate walls and dwellings and supports greater than 100mb/s speed. Truly high speed broadband to mobile devices is on its way in the form of LTE from Verizon

Verizon chose Microsoft’s search engine to provide internet service on its wireless mobile phones. It chose Microsoft over Google, the most widely used search engine, due to a better bargain that will also consist of advertising revenue. Microsoft plans to share advertising revenue, which is expected to be between $550 million to $650 million over the five-year term deal.

With the downsizing of the wireline business one of the biggest capital expenditures is disappearing. No longer does VZ add expensive CO equipment. There is sufficient capacity to manage their remaining wirline business.

Among the Bells, Verizon has the best strategy for the future of its fixed-line business. Its next-generation network--which enables unparalleled data speeds and upgradability--reaches nearly 8.5 million customers today and should extend to another 3 million annually for the next several years.

Acquiring MCI greatly accelerated Verizon's move into the large-business market without risking much financially. Only AT&T can match Verizon's capabilities in this segment.

Given earnings stability and solid business franchise, the 6% dividend is relatively safe.....and very attractive relative to money market rates of near zero. Ex-dividend date is in early October.

Previous 5 year average FCF yield at 3%.