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What Can We Expect of Verizon’s FiOS Internet Customer Growth in 4Q16?

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Verizon’s FiOS Internet net additions in 4Q16

Now let’s look at the Verizon Communications’ (VZ) Internet component, a key growth driver for the company. Verizon expects solid FiOS Internet net additions to continue, now that the company has overcome the impacts of its 2016 strike. It should now see margin benefits from its new union contract over time.

In 3Q16, Verizon added 90,000 new FiOS Internet customers, which resembles pre-work-stoppage levels. It appears that activity levels returned to normal levels more quickly than anticipated, resulting in better-than-expected FiOS volumes for the quarter. In 3Q16, Verizon’s FiOS Internet penetration rose 30 basis points to reach 40.4%, as compared to 40.1% in 2Q16. FiOS Internet subscribers grew by ~4.7% YoY (year-over-year) to reach ~5.6 million in 3Q16.

In the third quarter, net broadband connections for Verizon rose only 24,000. The net gains in FiOS connections were slightly offset by declines in DSL-based Internet connections.

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Verizon’s wireline business growth driven by FiOS

In 3Q16, the company’s Wireline business benefitted from the return of the FiOS business, after being affected by the labor strike in 2Q16. FiOS revenues of $2.8 billion grew by 4.4% YoY in 3Q16. The main reasons for this increase included a higher customer base, strong retention programs, and demand for higher Internet speeds.

Verizon’s biggest threat comes from cable companies like Comcast (CMCSA) and Charter Communications (CHTR) as they manage to add the most Internet subscribers, while phone companies AT&T (T) and CenturyLink (CTL) lost broadband subscribers in 3Q16.

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