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How Were Verizon’s Internet and Pay TV Customer Acquisitions in 2Q16?

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Verizon’s contract negotiations with employees

According to Verizon’s (VZ) press release on May 30, 2016, “it has reached tentative agreements with the Communications Workers of America (or CWA) and the International Brotherhood of Electrical Workers (IBEW) on new contracts for about 36,000 employees who work primarily for the company’s network operations and consumer and mass business units.” According to the company, the strike began on April 13, 2016.

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As per Lowell McAdam, the telecom company’s chair and CEO, the strike has affected new installations in 2Q16. According to McAdam, “we won’t be driving similar numbers in second quarter that we would in first from an installation perspective.” He spoke about this at the recent J.P. Morgan Global Technology, Media and Telecom Conference.

Earlier in the MoffettNathanson Media and Communications Summit held on May 19, 2016, Fran Shammo, Verizon’s EVP and CFO, highlighted, “I would be optimistic if I said we would be net positive for broadband and TV this quarter.”

Customer acquisitions of Verizon Fios

As you can see in the above chart, Verizon Fios Internet and video customer acquisitions have come down significantly on a net basis in 1Q16 from the levels in 1Q15.

In the Fios service, the telecom had net additions of ~36,000 and ~98,000, respectively, in video and Internet components in 1Q16. Earlier in 1Q15, the telecom company had net additions of ~90,000 and ~133,000, respectively, of video and Internet customers in Fios.

Fios is Verizon’s fiber-based Internet, voice, and video service. It can be compared to AT&T (T) GigaPower as well as some offerings of the cable players such as Comcast (CMCSA) (CMCSK).

For diversified exposure to telecom companies in the US, you can consider investing in the SPDR S&P 500 ETF (SPY). The ETF held a total of ~2.7% in the US telecom players at the end of April 2016.

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