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Key Drivers of Verizon’s FiOS Revenue Growth in 4Q14

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FiOS revenues

In the previous part of this series, we learned that Verizon’s (VZ) FiOS revenues supported growth of the consumer wireline segment in 4Q14. We also learned that FiOS is a fiber-optic voice, data, and video service that’s part of Verizon’s wireline segment. Plus, FiOS provides high data speeds, which are comparable to the speeds provided by cable companies such as Time Warner Cable (TWC) and Comcast (CMCSA). Now, we’ll look at some key growth drivers behind FiOS’s revenues.

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Quantum subscribers drive growth in FiOS revenues

Quantum is a high-speed Internet FiOS service. It provides Internet speeds of 50 MB, or megabytes, and higher. According to Verizon, growth in Quantum services contributed to the year-over-year increase in FiOS revenues in the consumer wireline segment in 4Q14. The penetration of these services continued to rise among FiOS consumer Internet subscribers during the quarter. As you can see in the above chart, the penetration of Quantum services increased from ~46% in 4Q13 to ~59% in 4Q14.

Subscriber growth fuels FiOS revenues

FiOS subscriber growth also contributed to the growth in Verizon’s consumer wireline revenues in 4Q14. The FiOS customer base grew by ~8% year-over-year in 4Q14. The growth predominantly came from the company’s Internet subscribers, who increased ~9% year-over-year during the quarter. Video and voice subscribers also contributed to the growth of FiOS connections in 4Q14.

If you want to take on diversified exposure to Verizon, you can invest in the Technology Select Sector SPDR Fund (XLK). The ETF held ~5% in the company on March 19, 2015.

You can take on more diversified exposure to the company by investing in the iShares Russell 1000 Growth ETF (IWF). The ETF held ~1.8% in Verizon on March 19, 2015.

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