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Verizon on Custom TV and Growth in Fios

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Verizon on Custom TV

At the recent Citi Internet, Media & Telecommunications Conference on January 6, 2016, Verizon’s (VZ) executive vice president and president of Product Innovation and New Businesses, Marni Walden, highlighted the rationale behind the company’s Custom TV offering and anticipated growth in Fios. The Fios service is similar to AT&T’s (T) U-verse and comparable to offerings of cable companies such as Comcast (CMCSA) (CMCSK).

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During the event, Walden states that “we still believe that there is growth in FiOS and the TV business. That’s the reason for Custom TV because we think we can get incremental growth from that. We have multi-dwelling units, which we can add more services.” Regarding Custom TV, she said that “this was really about how do we get to an individual that’s sitting in a FiOS market that’s never going to buy the big packages and ultimately they are weighing not whether they do the traditional bundle, do they do the traditional bundle or just go purely over the top.”

Adoption of Verizon’s Custom TV

Verizon launched the Custom TV offering in April 2015. According to the company, the adoption of this service was significant in both 2Q15 and 3Q15. More than one-third of its video gross additions in the Fios service were from the Custom TV offering in 2Q15, and 3Q15 saw a similar trend.

According to the company, Custom TV is a relatively high-margin service. Though it’s positively affecting the Fios video component, subscriber growth within Fios video had slowed down in recent quarters. As we can see in the above chart, on a net basis, Verizon added ~42,000 Fios video subscribers during 3Q15. Earlier in 3Q14, this number was ~114,000.

You may consider investing in the iShares MSCI USA Minimum Volatility ETF (USMV) to get diversified exposure to Verizon. The telecom company made up ~1.4% of USMV at the end of November 2015.

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