Skinny bundles remain popular
In this part of the series, we’ll look at Verizon’s (VZ) FiOS service. During the 3Q15 earnings conference call on October 20, 2015, Fran Shammo, Verizon’s CFO and EVP, talked about the recent performance of the company’s Custom TV offering. He said, “We continue to see interest in our Custom TV offering, which offers more choice and control at a lower price point.”
He also highlighted the impact of this service on future revenue growth and margins. He said, “We expect the continued adoption of Custom TV will pressure revenue growth but result in a higher contribution margin.”
FiOS revenues grew by ~7.5% year-over-year to ~$3.4 billion in 3Q15. This growth was lower than the 10% YoY increase in FiOS revenue in 2Q15.
During the conference call, Shammo also mentioned the continued significant competition in the US pay-TV industry. In 3Q15, the net additions in FiOS came predominantly from Internet subscribers.
On a net basis, the FiOS service added ~114,000 Internet customers and ~42,000 video subscribers in that quarter. For year-over-year subscriber growth in FiOS, video and internet subscribers grew by ~5.0% and ~7.2%, respectively, in 3Q15.
FiOS is Verizon’s fiber-based data, pay-TV, and voice service offered to both consumers and businesses. FiOS is similar to AT&T’s (T) U-verse and a comparable offering to products from cable players including Time Warner Cable (TWC) and Comcast (CMCSA).
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.