Verizon (NYSE: VZ) may be selling off a sizeable piece of its wireline network base to Frontier, but the service provider will have a concentrated FTTH base allowing it to effectively compete with Altice when the France-based company completes its Cablevision (NYSE: CVC) acquisition.
Speaking to investors during the carrier's third-quarter 2015 earnings call, Fran Shammo, CFO and EVP of Verizon, said that it has surpassed its FiOS FTTH build commitments and will continue to invest in its overall wireline network.
"With the three divestitures in the South, they were more or less footprints that were not contiguous to anything else and most of that property was copper not fiber," Shammo said. "When we look at the East Coast, we'll have covered over 70 percent of the footprint with our FiOS product and we're very committed to it."
Shammo added that "we're investing over $4 billion in our wireline company a year so that shows our capital commitment from a capital investment perspective."
Verizon has passed 20 million homes with FiOS, surpassing its 18 million goal. Despite its progress, a number of cities and towns such as Boston, which recently launched a campaign to entice the provider to build in their city, will likely never get the benefits of the FTTH service.
Given the density of the markets, the East Coast is a prime spot to be with FTTH service, particularly as cable operators like Altice and Comcast expand their offerings.
"If you asked anyone like Altice if you were going to come in and compete for fiber into the home, you'd either pick the West Coast or the East Coast and they picked the East Coast," Shammo said. "We have a viable footprint and we're committed to that."
While Verizon has maintained it will have a sizeable East Coast footprint, Shammo hinted that it might be willing to sell other assets if the right opportunity came along.
"As I have always said you never say never," Shammo said. "We're always open to new options and we always keep our eyes open for that but at this point we're very committed to the wireline business."
Verizon's consumer wireline revenues were $4 billion, up 2.8 percent compared with third-quarter 2014. FiOS revenues represented 79 percent of the total.
Total FiOS revenues grew 7.5 percent, to $3.4 billion, comparing third-quarter 2015 with third-quarter 2014.
Here's a breakdown of Verizon's third-quarter key wireline metrics:
Broadband: FiOS continues to be the leading factor in its broadband business, with 114,000 net additions to end the quarter with a total of 6.9 million subscribers. It reached 41.7 percent penetration of the wireline markets it serves with FiOS, up from 40.6 percent at the end of the third-quarter 2014.
Within FiOS, the service provider said that two-thirds of its customer base subscribed to a Quantum package, which provides speeds from 50 to 500 Mbps. Similar to earlier quarters, the highest rate of growth was in the 75 Mbps tier, one that one-fourth of its Quantum customers subscribe to today.
"We continued to see growth in our 75 Mbps speed tier where one-fourth of our Quantum customer base currently subscribed," Shammo said.
However compelling the FiOS growth was, Verizon continued to shed DSL customers. As of the end of the quarter, high speed Internet (HSI) customers were 2.3 million, down 14.5 percent from 2.7 million in the same period a year ago.
Video: The telco said that FiOS video subscribers grew 5 percent to 5.8 million, up from 5.3 million a year ago. It added a total of 42,000 new subscribers.
Business and Wholesale: Due to a series of secular and economic challenges, Verizon continued to see struggles in its Global Enterprise and Wholesale units as revenues declined 4.9 and 5.8 percent to $3.21 and $1.46 billion, respectively.
"On the enterprise piece, I guess what I would say is we're seeing more or less the same and there's been no change," Shammo said. "There's a lot of competition and there's a lot of price compression continuing in the IP space."
Shammo added that it has made gains on the strategic side around security and data centers, "but even in data centers there's an awful lot of competition happening with price compression."
From an overall financial perspective, total operating revenues were $33.2 billion, up 5 percent year-over-year from the third-quarter 2014. Current-quarter revenues include results from AOL. The comparable year-over-year growth rate excluding AOL (non-GAAP) would have been 3.1 percent.
Consolidated revenue grew 3.3 percent year-over-year, after adjusting for the inclusion of AOL in the third quarter and the sale of the public sector business in 2014.
For more:
- see the earnings release
- hear the webcast (reg req.)
Special report: Tracking wireline telecom earnings in Q3 2015
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