Verizon won't need more capital to build FiOS customer base

Verizon (NYSE: VZ) may not be interested in bringing FTTH services to more areas, but in the markets that are lucky enough to have it the service provider won't have to allocate more capital to connect customers that lie within the path of the fiber network.

Speaking to investors during the Wells Fargo Securities 2015 Technology, Media & Telecom Conference, Fran Shammo, CFO of Verizon, said that as the provider reaches the end of its FiOS build out it can turn on customers with minimal costs.

This is because the service provider has already laid fiber into the neighborhoods and homes and has installed optical network terminals (ONTs) on the sides of those homes to connect the fiber to the users.

"The FiOS build is coming to a close, and we still have obligations in New York and Philadelphia that we will continue to fulfill, but the real build is starting to slow down," Shammo said. "The other thing is that as you think about FiOS, we have been at this for 10 years and connecting ONTs on the side of homes, so as those homes start to reconnect there's no capital investment anymore."

What this points to is that it capex spending on wireline will decline while wireless spending accelerates for densification efforts such as small cells.

"You start to get the synergy of the capex within that FiOS territory," Shammo said. "That's why you see wireline continue to slow, while wireless will take on that capex because of the densification efforts."

When it completes its sale of its wireline assets to Frontier in California, Florida and Texas, the telco will have FiOS coverage in 70 percent of its East coast footprint.

As of the end of the third-quarter, Verizon passed 20 million homes with FiOS, surpassing its 18 million goal. Regardless, 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 see the benefits of the FTTH service.  

Even though it may be reaching the end of its FiOS build and selling off assets to Frontier, Verizon sees potential to continue to grow the customer base in the areas where it offers the service, particularly for broadband data services as more of its users cut traditional pay-TV services.

"Where we sit in FiOS, we still believe we have a great footprint on the East Coast, it's a highly populated footprint, it's under indexed for us so we believe we have a lot of growth in taking from our competitors," Shammo said. "Although it is going to decline, it's not going to be a steep decline."

For more:
- hear the webcast (reg. req.)

Related articles:
Verizon's Shammo says comments about enterprise business are baseless
Report: Verizon mulls $10B sale of enterprise business
Verizon likely won't sell wireline assets, says analyst firm
Verizon's Shammo: We'll have FiOS coverage in 70 percent of our East Coast footprint

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