LAS VEGAS (Reuters) - Verizon Communications can generate hundreds of millions of dollars of revenue in coming years from wireless services beyond the mobile phone, in areas ranging from healthcare and automobiles to energy management, the company’s top executive said on Monday.
The No. 1 U.S. mobile carrier joins other companies expected to debate and demonstrate the benefits of connecting devices - like cars - to the Internet at this year’s Consumer Electronics Show in Las Vegas. Operators like Verizon consider this an important new business.
“It’s safe to say this is a market potential of billions in the 2020 timeframe,” Lowell McAdam told Reuters in an interview. This should translate into a market with “hundreds of millions of dollars in revenue for a company the size of us,” he said.
“People will be really surprised at what we’re able to do,” he said. “The power of the networks is finally going to be able to provide these sort of things.
“In 2013 and 2014 you’re going to begin to see that.”
Taking wireless access beyond the mobile device is expected to become a major theme this year in Vegas. And McAdam said the so-called “Internet of Things” would be a big theme of his own keynote speech on Tuesday.
For example, wireless connections can allow doctors to remotely diagnose an illness and direct a pharmacist to administer medication, McAdam said. He also talked about public safety improvements, such as the ability of firefighters to navigate a burning building with an infrared camera that has wireless access to its layout.
IDC expects the entire market for cellular connections for devices beyond computers or phones to generate revenue of nearly $1 billion by 2016 in the United States alone.
Verizon’s biggest rival, AT&T Inc, announced on Monday that it is pushing ahead with its plan to develop a wireless home security service.
McAdam’s comments came moments before he told investors that Verizon Wireless had its strongest fourth-quarter ever in the final three months of 2012, tacking on a net 2.1 million subscribers during a period that saw take-up for the iPhone 5 and other devices accelerate.
However, Verizon will take a $1 billion one-time charge related to Hurricane Sandy, which pummeled the east coast and took down infrastructure across the region. A third of the one-time items are covered by insurance, he told a Citigroup investment conference in Vegas.
In his wide-ranging interview with Reuters on the sidelines of the world’s largest technology showcase, McAdam, 58, also talked about potential shifts in the industry in coming years.
He said he is open to eliminating subsidies on mobile phones that sharply reduce the cost of devices to consumers, but said buyers now prefer paying less up front and paying higher service fees during a long-term wireless contract.
Smaller rival T-Mobile USA, a unit of Deutsche Telekom, has announced a plan to get rid of device subsidies this year, but McAdam said it is not clear this would work for Verizon and the rest of the U.S. market.
U.S. operators like AT&T and Verizon typically pay handset makers like Apple Inc hundreds of dollars for every phone, so they can offer discounts to customers that in turn commit to more lucrative service contracts.
“It’s very intriguing. Every carrier has thought about doing away with subsidies,” he said, but “I don’t think U.S. consumers are ready to buy an iPhone for $700.”
McAdam also urged U.S. regulators, including the Federal Communications Commission, to approve several industry mergers and acquisitions in the pipeline that telecoms observers say have the potential to transform the market.
T-Mobile USA is seeking approval to merge with smaller rival MetroPCS Communications Inc. Sprint Nextel is looking for the nod to sell a 70 percent stake to Japan’s Softbank Corp.
Some analysts say such combinations could pressure bigger players such as Verizon Wireless, as they face stronger rivals with the ability to compete more aggressively. But McAdam urged U.S. regulators to approve the deals.
“Three to four strong carriers are a lot better for the market than a couple of weak ones that are struggling to stay afloat and do dumb things,” said McAdam, referring to the potential for promotions that could ignite a price war.
Since McAdam became Verizon CEO, Verizon Wireless - Verizon’s joint venture with Vodafone - gained regulatory approval for a purchase of about $3.9 billion of wireless spectrum from cable companies.
Reporting By Sinead Carew; Editing by Bernard Orr