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Verizon Fios Revenue to Be Negatively Affected by Strike

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Performance of Verizon Fios in 2Q16

A key growth driver for Verizon’s (VZ) shrinking wireline component has been Fios. In 1Q16, Fios revenue increased by ~5% YoY (year-over-year) to ~$3.5 billion. Meanwhile, the revenue of Verizon’s overall wireline segment declined by ~1.9% YoY to reach ~$9.3 billion in the quarter. According to the company, the Fios service was negatively affected by the strike of its wireline employees from April 13 to June 1, 2016. On a net basis, the company anticipates customer losses in the Fios video and Internet components during 2Q16.

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Verizon Fios customers in 1Q16

On a YoY basis, Fios Internet connections increased by ~5.7% to reach ~7.1 million in 1Q16. Fios video subscribers increased by ~2.2% YoY to ~5.9 million. Fios Internet and video had net customer acquisitions of ~98,000 and ~36,000, respectively, compared with ~99,000 and ~20,000 in 4Q15.

Verizon Fios

Fios is Verizon’s fiber-based Internet, voice, and video service. Fios is for both consumers and businesses. However, it derives its revenue primarily from the consumer wireline component. Fios is similar to AT&T’s (T) GigaPower and some offerings of cable players such as Comcast (CMCSA) (CMCSK).

Instead of direct exposure to the stocks of US telecom players, you could consider diversified exposure by investing in the SPDR S&P 500 ETF (SPY). The ETF had a total of ~2.7% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Level 3 Communications (LVLT), and Frontier Communications (FTR) at the end of May 2016.

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