Verizon's Broadband and Pay TV Share Grow from FiOS Push

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Verizon's ( VZ ) fiber-optic technology based service (FiOS) adoption is starting to accelerate following its efforts to focus on distribution after an extensive roll out of its coverage. The company recently reported its Q3 2010 earnings citing improvements in FiOS subscriber additions and noted its new focus on sales and marketing of its existing coverage versus further expansion.

Verizon has traditionally competed with telecom providers like Sprint Nextel ( S ) and AT&T ( T ), but is increasingly competing with cable / satellite providers like Comcast ( CMCSA ), Time Warner Cable ( TWC ) and Dish Network (DISH).

We believe that Verizon's greater focus on sales and marketing of its FiOS service will improve broadband market share and pay TV share, which are key drivers of its FiOS business and Verizon's stock.  Based on Trefis estimates, FiOS related services account for around 12% of the $31.69 Trefis price estimate for Verizon's stock - slightly below its current market price.

FiOS Subscriber Additions Encouraging

The quarterly subscriber additions for FiOS have steadily increased through 2010 after a dip in 2009, interestingly coinciding with moves in the overall economy.  FiOS broadband quarterly subscriber additions declined from 289,000 in Q2 2009 to about 150,000 in Q4 2009. In 2010, this figure totaled 226,000 in recently concluded Q3 of 2010.  A similar trend applies to FiOS TV subscribers as well.

We now expect that by the end of 2010, Verizon will have a broadband market share of close to 10% and pay TV market share of close to 3.3%, driven by the expansion of its FiOS service. Note that the recent dip in broadband market share is a result of adjustments due to divested properties and transactions in rural communities and not reflective of its current trends, which we see continuing to rise in the coming years.

Promotions Accelerating Additions, Helping Market Share

Verizon stated in its recent Q3 2010 earnings that it will shift its focus on FiOS from expansion to sales and marketing efforts.  Recent "Worry Free Guarantee" promotions that include attractive terms like monthly billing and no early termination fees are encouraging new customers to sign up.

We believe that such efforts could increase the broadband market share and pay TV market share beyond our current estimates.  We expect Verizon's broadband market share to increase from about 10% in 2010 to more than 12% by the end of our forecast period.  Similarly, we expect Verizon's share of the pay TV to increase from about 3% in 2010 to nearly 8% by the end of our forecast period.

However, there could be an upside of more than 30% to the Trefis price estimate for Verizon if the company's broadband and pay TV market shares turned out to be double our forecasts.

You can see the complete $31.69 Trefis price estimate for Verizon's stock here.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: CMCSA , S , T , TWC , VZ

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