Verizon (NYSE:VZ, news, filings) kicked off the US telecommunications earning season with a solid third quarter. Revenues of $29.0B and adjusted EPS of $0.64 were each right on target, with profit margins at Verizon Wireless powering the way forward.
Verizon Wireless added 1.8M net retail wireless customers, which was above expectations, finishing the quarter at 95.9M. Meanwhile, the extra data consumed by smartphones helped grow the average monthly contract account over $145, up 6% over last year.
Wireline results were more muted, with FIOS and sales of strategic services to enterprises only partially offsetting the usual declines in voice and other legacy revenues. With FIOS growth the primary strong point in wireline, one wonders why Verizon doesn’t revisit that business model and consider finding creative ways to improve its cost structure and restart the expansion.
Meanwhile, Verizon says it is transfering pension assets to Prudential via a single premium group-annuity contract to settle $7.5B of its obligations for 41,000 of its pension plan participants. As part of that, they are contributing some $2.5B to the plan, but then do not expect to have any cash requirements for pensions in 2013.
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Categories: Financials · ILECs, PTTs · Wireless
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So why doesn’t Verizon revamp FIOS and expand the footprint?
— Because the economics/ROIC just doesn’t work? They need a certain density to roll FTTH out and make money and have extended just about as far as those restraints allow. Making a broad statement, cable is a natural monopoly– some overbuilding can be justified (which is why overbuiders do exist) but not across entire geographies. V and T can’t justify broad builds just to defend their retail wireline business and it wasn’t capital constraints that led them to put a lid on these programs.
But it’s been quite a while since Verizon first designed FIOS, it seems to me that the economics must have shifted since if one is creative with the design and implementation. Where is the evolution?
Well Rob, polls suggest that fully 60% of Americans don’t believe in evolution. If that is true within Verizon then perhaps they have just given up?
I think more likely is that the FIOS architecture (and it surely has improved around the edges over the last five years) has had nothing truly revolutionary occur such that they can overcome the fact that households are only willing to pay X per month for a full suite of services and it costs y to hook them up, and the maths don’t work in lerss dense geographies.
Wat ar u tryin’ ta say? 60% of AmeriCANS are unedumacated?