In the previous part of this series, we looked primarily at the video component of Verizon’s (VZ) FiOS service. We can compare the service to AT&T’s (T) U-verse and the offerings of cable companies including Time Warner Cable (TWC) and Comcast (CMCSA). Here, we’ll focus on the service’s broadband component. Verizon’s consumer wireline segment’s revenue grew by ~2.8% year-over-year to reach ~$4 billion in 3Q15. Meanwhile, the consumer revenue from the FiOS service increased at a higher rate, by ~7.1%.
According to the company, the rising penetration of its Quantum service was one of the factors that positively affected growth in FiOS consumer revenue during the quarter.
Growing popularity of the Quantum service
Quantum is Verizon’s high-speed Internet offering with speeds from 50 Mbps, or megabits per second, to 500 Mbps. As you can see in the above chart, the penetration of the Quantum service in the FiOS consumer subscriber base continued to grow in 3Q15.
During the 3Q15 earnings conference call on October 20, 2015, Fran Shammo, Verizon’s CFO and EVP, highlighted the internet subscribers’ preference for FiOS high-speed offerings.
He said, “At the end of the quarter, roughly 2/3 of our consumer fios Internet customers subscribed to data speeds of 50 megabits per second or higher.” He also added, “We are seeing the highest rate of growth in the 75 megabit speed tier, where one-fourth of our Quantum customers currently subscribe.”
Instead of taking on direct exposure to Verizon’s stock, you may take on diversified exposure to the telecom company by investing in the SPDR Dow Jones Industrial Average ETF (DIA). The ETF invested ~1.9% of its portfolio in the telecom company at the end of August 2015.