Expectations for FiOS
In the first part of the series, we learned that Verizon (VZ) may not soon sell remaining wireline assets following its transaction with Frontier Communications (FTR). We also learned that wireline is a shrinking business for the telecom company. During the Goldman Sachs Communacopia Conference held on September 17, 2015, Lowell McAdam, Verizon’s CEO (chief executive officer) and chairman, talked about FiOS—a growth driver of the company’s wireline segment.
He said “I think we can continue to grow FiOS. It is such a positive product. We’ve got some great markets. By selling the three satellite properties that we sold we can concentrate our firepower in the Washington to Boston corridor. There’s some good markets there that we can expand into under the right circumstances.”
FiOS is a fast-growing wireline revenue stream. The revenue from FiOS rose by a higher rate of ~10% YoY (year-over-year) to reach ~$3.4 billion in 2Q15. This is significant considering the revenue from the telecom company’s wireline segment fell ~2.2% YoY during the quarter. About 36.5% of the segment’s revenue came from FiOS in 2Q15.
FiOS is provided to both consumers and businesses. It’s a fiber-optic voice, Internet, and IPTV (Internet protocol television) service. FiOS is similar to AT&T’s (T) U-verse.
Instead of taking on direct exposure to Verizon’s stock, you may consider getting diversified exposure to the company by investing in the SPDR Dow Jones Industrial Average ETF (DIA) or the SPDR S&P 500 ETF (SPY). Verizon made up ~1.9% of DIA as of August 31, 2015, and it accounted for ~1.1% of SPY’s holdings as of the same date.