Verizon Is Taking FiOS to a Whole New Level

Jacob is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Verizon (NYSE: VZ) is undoubtedly a global leader in delivering first-class FiOS services to consumers, businesses, government, and wholesale customers. To illustrate the point, recently the company completed the installation of fiber-optic cables between the company’s two critical switching offices in Lower Manhattan, less than seven weeks after Hurricane Sandy. In fact, Verizon has been trying to take more of the nation’s FiOS market, and its overall market share has been increasing since the beginning of the year, despite 4G LTE taking the nation by storm.

Verizon posted third quarter consolidated revenue of 56 cents in diluted earnings per share, compared with 49 cents per share same quarter in 2011, a 14.3% increase. But the FiOS network, which led to strong overall growth among US customers, has been outstanding. Verizon added 136,000 new net FiOS internet connections and 119,000 new net FiOS video connections in the third quarter. The company has a total of 5.3 million FiOS internet and 4.6 million FiOS video connections at the end of the quarter, representing year-over-year increases of 14.4% and 15.4%, respectively. The FiOS network propelled consumer revenues to grow by 4.6% compared to third quarter 2011, the highest year-over-year quarterly revenue increase in a decade.

Despite its success, Verizon is facing strong challenges from Sprint Nextel (NYSE: S), AT&T (NYSE: T), and T-Mobile. With the exponential rate of 4G LTE adoption, Verizon has to continuously improve its network so as not to fall behind its competitors. Making the matter difficult for Verizon, AT&T and Sprint show great determination and ambition to cut into its market share. The gross margin of Verizon stands at 0.60, not much better than 0.41 for Sprint and 0.55 for AT&T. The net income of Verizon is $3.08 billion, less than $4.44 billion for AT&T but far better than $-4.31 for Sprint Nextel.

Verizon’s FiOS network has been strengthened a number of times this year. The mobile giant is leaving no stone unturned to ensure FiOS network increases its wire line revenues. The company launched online access to NFL network programming to allow FiOS customers to watch their favorite professional football teams. Verizon continued to expand its next-generation 100 gigabits-per-second network, enabling more network routes in the US and two additional routes in Europe. The company also took advantage of the fully activated Europe/India gateway submarine system. As part of its strategy to boost revenues for the FiOS network, Verizon launched several projects in the second quarter, including deployment of next-generation equipment on the IP network to meet growth demands and improve scalability.

Despite the intense challenge from rivals such as AT&T, Sprint, and T-Mobile, recent financial reports from Verizon show that the FiOS network has consistently improved wire line revenues, and the company’s cash position looks good. The third quarter report claims that FiOS penetration was 37.0%, compared with 34.6% at the end of third-quarter 2011. Many analysts believe the FiOS network is a great asset to Verizon. The balance sheet of Verizon is healthy, making experts believe it has sufficient finances to carry it through rivalry with AT&T and Sprint and enable the company remain a global leader in the FiOS sector.


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