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Verizon considering LTE-only phones in 2014 in push to lower subsidies

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Verizon logo (STOCK)
Verizon logo (STOCK)

Soon after Verizon transitions to Voice over LTE for ordinary telephone calls around the end of the year, it could start selling phones without CDMA chipsets, reducing costs and associated subsidies, said the company’s CFO Fran Shammo. At Deutsche Bank’s Media, Internet, and Telecom conference, Shammo spoke about how a switch to "pure LTE" phones beginning in late 2014 could reduce subsidies over the next two to three years.

"We will ultimately get to voice over LTE, probably end of this year, beginning of next year. Then if you look out into late 2014 then you start to think of things like, okay, so now I can start to take the CDMA chip out of the phone and just have a pure LTE handset. That also starts to reduce subsidies. So over the next two to three years I think we will start to see subsidies come down."

The end of subsidies has been a hot topic in the wireless industry over the past year, and while T-Mobile has been particularly enthusiastic about the idea, Verizon’s CEO Lowell McAdam has also voiced his support, although questioning whether consumers will come to accept the resulting higher prices.

Talking about Verizon’s wireline business, Shammo discussed the company’s plan to give high-speed fiber access to another 300,000 homes, adding to the 200,000 it’s upgraded since the company began its copper-to-fiber migration last year. The CFO notes that people are willing to pay extra for speeds between 15Mbps and 50Mbps, allowing Verizon to "monetize that fiber network more."

Having the iPhone 4 available for free generated 'a lot of volume'

After brushing off questions about the likelihood of Verizon buying back Vodafone’s 45 percent stake in the company, Shammo took some time to discuss growth prospects. The CFO acknowledged that the US cellphone market is getting increasingly saturated, but pointed to a growing number of MiFi devices on its network, owing to a boom in Wi-Fi-only tablet sales. And while Verizon might not be investing any more in its 3G network other than to keep it up and running, having the iPhone 4 available for free when the iPhone 5 launched in September generated "a lot of volume" for the company. With Verizon’s continued investment in LTE infrastructure over the next two years, its older CDMA network is going to become less and less important, but Shammo points out that just by keeping it up and running, it will remain an important source of revenue for the company.