Verizon's Frontier sale gives it a contiguous Northeast FiOS footprint, says Shammo

Verizon's (NYSE: VZ) recent move to sell off its wireline assets in three markets to Frontier Communications will consolidate its fiber-to-the-premises (FTTP) FiOS service in the Northeast market, one where it will battle aggressive cable competition from Cablevision (NYSE: CVC) and a potentially soon-to-be-combined Comcast (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC) for consumer broadband dollars.

Speaking to investors at the Deutsche Bank 2015 Media, Internet & Telecom Conference, Fran Shammo, CFO and EVP of Verizon, told investors that this deal will give it a consistent FTTP footprint.

"As we move into the future, I think we sit here and say we have a great set of properties on the FiOS footprint that are contiguous up and down the Northeast corridor," Shammo said.

The Northeast FiOS market and related wireline properties are unlike the Frontier assets, which were more fragmented.

"The divestiture of the three properties, which consist of Florida, California and Texas, were looked at as islands amongst themselves and don't fit anywhere else in the footprint and are not contiguous with any other wireline properties we have," Shammo said.  

Shammo added that while these three markets mainly consisted of copper-based technologies, they also have high levels of FiOS penetration because they were the initial areas to get the service.  

"They are still very concentrated in copper and some are FiOS enabled, but they are very highly penetrated FiOS markets because they were some of the first markets we did," he said.  

FiOS continues to be a key element of Verizon's wireline revenue mix, with the addition 145,000 net new FiOS Internet connections and 116,000 net new FiOS Video connections during the fourth quarter. While FiOS video subscriptions rose slightly, broadband connections were down from the 162,000 it reported in the third quarter of 2014.

But the question remains: What about future FiOS growth?

Even as it consolidates its FiOS presence in the Northeast after it completes the Frontier deal, there are no immediate plans, if any, to expand the FiOS footprint into new cities or towns.

Earlier this month, Shammo said that it will only honor existing local franchising authority (LFA) agreements in areas like Philadelphia, New York and Washington, D.C., but did not mention any plans to expand into new areas.

Given its focus on building out in existing markets in the Northeast, Verizon will be facing aggressive moves by dominant cable providers such as Cablevision, and a potentially soon-to-be-combined Time Warner Cable/Comcast that will continue to challenge the telco with higher speed offerings that leverage both existing hybrid fiber coax (HFC) and potentially FTTP.

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Related articles:
Verizon's FiOS growth continued to cushion the blow of wireline revenue declines in Q4
Verizon's Shammo hints that company may offload more non-strategic assets
Frontier enhances wireline footprint with $10.5B Verizon purchase, but integration concerns remain
Verizon's McAdam: Some wireline assets would be better off in someone else's hands