Verizon had a solid final quarter of 2017 and regained its claim as largest smartphone channel in the US market.  The carrier activated 10.3m smartphones during the quarter, which is down 2% from last year’s 10.5m smartphones, but none-the-less impressive since this holiday season saw a much more rational marketing campaign season.  Verizon added 1.2m retail postpaid net additions, of which, 421k were premium phone net adds.

Smartphone sales jumped to 10.3m during seasonally strong Q4. Wearables and IoT revenues both saw great YoY growth (for further details, see US Q4 Quarterly Update).  Other insights from the quarter:

• Verizon now has a postpaid phone base of almost 88m—over 20m more than AT&T.  Up until this quarter, it has been increasing its share of iPhones & Galaxies relative to competitors.  However, challengers have cut slightly into the company’s lead this quarter and reduced the carrier’s share of iPhones. 
• Upgrades rebounded to 7.2% for the quarter, which is still down from last year’s 8.3%.  Counterpoint Research surveys showed there was lower Android-iOS switching this quarter with less enticing Apple promos and a Note refresh without battery issues. 

• Postpaid churn rose slightly to 1%.  Phone churn remains a remarkable .77%, leading the big 4.
• Counterpoint surveys estimate that Apple held ~54% of postpaid market share during Q4. 
• The iPhone X was the top seller from mid-November until the end of the quarter.  Supply caught up with demand mid-December.
• The iPhone 8 and iPhone 8 Plus sold similar volumes.
• Older iPhones still held high single digit market share within postpaid stores.
• Of Samsung flagships, the Note 8 was the top seller followed by the GS8 and GS8 Plus.
• An extended $300 Pixel 2 promo ran through the quarter which helped sales.  However, the Google Pixel devices remain a disappointment relative to how much marketing has been spent.  Worse, volumes are being skimmed from weak Android players and very little from iOS—it’s reason to be. 
• LG remains consistent in share, but volumes have shifted to K-series from G. 
• Motorola volumes are driven by entry.  Z2 Force Edition has sold in low volumes.  Overall, it has been good for Motorola to leave Verizon exclusivity. 
• HTC is rarely seen in stores and is only available by order.
• Prepaid remains outside of Verizon’s focus.  Basic smartphones drove volumes.  Best prepaid sellers include Samsung J-series, Moto E4, and LG Optimus Zone 3.
• Equipment revenues were up 12% despite selling fewer smartphones.  In postpaid, over 23% of device sales were over $800.  The explosion of wearables drove revenues higher, too. 
• Postpaid surveys showed 256GB outsold 64GB X early in sales.  But, by the end of November, 64GB sales easily overtook 256GB sales by a ratio of 2:1. 
• 80% of the base is now on an unsubsidized service plan, up from 67% last year.  This will increase slightly in 2018, but not drastically as business plans quietly remain on subsidized plans.  Service revenue was down 2%, but as stated equipment revenues increased 12%.  Total operating revenue decline has or nearly has bottomed out and should be positive for 2018.

Other devices:

• Wearables sales took off during the quarter, over 350k, mainly due to Apple iWatch sales. 
• After a slow start, HUM sales continue to slowly build.  Non-wifi versions are selling better than wifi versions.  Key use cases are car diagnostics and tracking (especially young drivers!).
• IoT revenues rose to $230m, up 17% YoY.  Fleet management applications and smart city revenues drove growth.  

Marketing Q4:

• It was a mild Q4 relative to last year’s massive iPhone upgrade sweepstakes.  This year’s Q4 did have its share of BOGOs, but they required new lines.  This made the uptake mild relative to last year when no new line was required, and the Apple base upgraded in force. 
• $300 credit of iPhone with trade-in and Pixel 2 half off with trade-in of a high-end smartphone were early quarter main promos.
• On budget devices, there were three price targets which had price drops.  LG 20V went to free (from $5/month), Samsung Galaxy J7V fell to $5 (from $10/month), and Moto Z2 Play fell to $10 (from $17/month).

5G plans & media plans:

• Verizon confirmed its plan to pull in 5G deployment.  3-5 cities will be 5G enabled.  Fixed wireless will be first use cases followed by residential broadband.  More low latency use cases will follow deployment. 
• Trials continue.  More than 200 sites are online.  Testing is ongoing with peak through puts hitting 10Gbps.  The company is confident subs will see at least 1Gbps. 
• Verizon does have an advantage with the fiber assets it has deployed.  The company will deploy 12.5 miles of fiber per year over the next three years.  The fiber deal it has with Corning is on plan. 
• Key 5G use cases the company hopes to deploy include new, remote education applications, smart cities, assisted/autonomous driving and remote healthcare. 
• Limited update on the state of Go90.  CEO Lowell McAdam vowed there are no large media acquisitions in play right now.  Go90 and other media spends have been a disaster for Verizon, thus far, so we take McAdam’s comment as truth.