) 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 (
) and AT&T (
), but is increasingly competing with cable / satellite providers
like Comcast (
), Time Warner Cable (
) 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
- 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
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.