iPhone 5 Will Further Hit Verizon's Margins

Sept. 14, 2012 - PRLog -- We had argued that the stocks of Verizon Communications (VZ) and AT&T Inc. (T) are attractive, not because they are growth stories, but because they are offering high dividend yields in the current low-yield environment. Verizon currently offers a high dividend yield of 4.6%, which compares very well to the current 10-year treasury yield of 1.67%. However, it must be a worrying sign for investors when these telecoms display fluctuations in their margins due to a product launch (iPhone 5).

Verizon Communications Inc. has been partnering with Apple (AAPL) to sell its products since the start of 2011, and now with the recent launch of the iPhone 5, it is one of the three carriers that will carry it apart from AT&T and Sprint Nextel Corporation (S). Verizon has announced that it will offer the new iPhone from September 21, with the 16GB model going as low as $199 on a two-year contract.

Both AT&T and Verizon sell the most number of iPhones in the U.S., and despite the high subsidies they have to pay, they will definitely keep selling Apple devices. Now, with the possibility of a Samsung ban, Apple might even be able to increase its market share at both Verizon and AT&T. Telecom carriers need the iPhone so they can increase their market share, and since they can't reduce the subsidies they pay, they will be pushed to keep raising prices on their plans, which will eventually be borne by consumers.

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