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Wireless is Verizon’s Core Focus Area

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Verizon’s core focus in wireless

In the earlier parts of this series, we learned about Verizon’s (VZ) transaction to sell wireline properties in tree states to Frontier Communications (FTR). During the Bank of America Merrill Lynch 2015 Media, Communications and Entertainment Conference, John Stratton, Verizon’s Global Enterprise and Consumer Wireline business, highlighted the focus of the company on wireless and value of its FiOS product.

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Addressing the conference, Stratton noted, “So as you look forward with Verizon, without question Wireless remains sort of at the center of our strategy, but we still have significant investment and value in the remaining FiOS markets. If you look at the Northeast corridor to the mid-Atlantic states, probably the richest telecommunications properties that you’ll find anywhere and certainly in the US, great assets, highly valuable.”

Wireless is the key segment of Verizon’s business. It generated revenue and EBITDA (earnings before interest, tax, depreciation, and amortization) of ~$22.6 billion and ~$9.9 billion, respectively, in 2Q15.

The revenue and EBITDA figures of wireline division were ~$9.4 billion and ~$2.2 billion, respectively, during the quarter. In terms of investments, Verizon’s wireless capital expenditure was almost three times its wireline capital expenditure in 2Q15.

FiOS: A key driver of the wireline segment

A fiber-based voice, Internet, and IPTV (Internet protocol television) service, FiOS is provided to consumers and businesses. FiOS is similar to AT&T (T) U-verse. FiOS provides fast-growing wireline revenue stream. The revenue from this service grew by a relatively significant rate of ~10% year-over-year (or YoY) to reach ~$3.4 billion in 2Q15.

The revenue from Verizon’s wireline segment declined ~2.2% YoY during the quarter, and ~36.5% of the segment’s revenue came from FiOS in 2Q15.

You may take exposure on Verizon while diversifying risk by investing in the iShares MSCI USA Minimum Volatility ETF (USMV) or the iShares Core S&P 500 ETF (IVV). USMV held ~1.4% in the telecom company as of August 31, 2015. Verizon contributed to ~1.1% of IVV’s holdings on the same date.

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