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Verizon Sees Flat FiOS in Q3

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The wireless communication giant Verizon Communications Inc. (VZ - Free Report) expects FiOS subscriber growth to remain stable in the third quarter due to the new pricing. The new FiOS pricing have imposed a burden on customers to pay an extra $10–$15 per month for bundled television and broadband service, thereby leading to lower subscription.

Verizon is seeking new ways such as FiOS Quantum, copper-to-fiber migration and cost-cutting measures to drive FiOS revenue growth and maximize profitability. However, these initiatives would restrict near-term FiOS subscriber additions. As a result, wireline revenue trends would also remain challenging over the next couple of quarters.

Earlier, Verizon had projected FiOS subscriber growth in a range of 150,000-170,000 for the third quarter. Now, the company will not be able to meet this expectation until the fourth quarter.

Verizon continued to grow its FiOS subscriber base in the second quarter on the back of high speed and progressive video offerings. The company added 120,000 and 134,000 new customers to its FiOS Video and FiOS Internet services, respectively. The penetration rate (subscribers as a percentage of potential subscribers) of both FiOS Internet and FiOS Video increased to approximately 36.6% and 32.6%, respectively, across all markets from the year-ago respective levels of 33.9% and 29.9%.

The deployment of high-speed FiOS data networks will provide the company a competitive edge against major cable operators such as Comcast Corporation (CMCSA - Free Report) , Time Warner Cable Inc. and Cablevision Systems Corporation .

We have a long-term Neutral recommendation on Verizon. Currently, the stock retains the Zacks #3 (Hold) Rank for the short term (1–3 months).

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