Verizon’s focus on broadband
In the earlier parts of the series, we learned about some pay-TV market trends affecting Verizon (VZ). The telecom company is managing the secular challenges of the pay-TV space by focusing on its broadband offering in FiOS. Lowell McAdam, Verizon’s CEO (chief executive officer) and chairman discussed this at the recent Goldman Sachs Communacopia Conference held September 17, 2015,
Lowell said “we are really embracing—we sell a lot of FiOS every year but we are embracing the broadband service because that’s where the market seems to be going. So we are offering higher speeds.” He added that “we are selling a lots of 50 Mbps. We can easily do up to 500 Mbps. We can easily do all the way up to a gig if we need to. We are selling more 150 Mbps packages every day to our customers today.”
Quantum’s rising penetration in consumer FiOS subscribers
FiOS Quantum Internet service offers high-speed Internet of 50 Mbps (megabits per second) and more. It gives Verizon comparable positioning in a market with players offering up to single gigabit-per-second or higher Internet offerings. These players include cable companies such as Comcast (CMCSA) and telecom companies such as AT&T (T).
FiOS Quantum services are contributing to the growth of FiOS consumer revenue. These relatively high unit revenue-generating services are penetrating further into the consumer segment, rising from ~55% in 2Q14 to ~64% in 2Q15.
Instead of taking on direct exposure to Verizon’s stock, you can get diversified exposure to Verizon by investing in the Technology Select Sector SPDR ETF (XLK). The ETF held ~4.8% in the telecom company as of August 31, 2015.
You may also take on more diversified exposure to Verizon by investing the iShares MSCI USA Minimum Volatility ETF (USMV). The ETF held ~1.4% in the telecom company at the end of August.