FiOS: No Longer a High Flyer?
Analysts were generally disappointed with FiOS sales in 2009, given that Verizon added fewer than 1 million new customers -- about the same total as in 2008 -- despite continuing to build out the network and pass more homes. The fourth quarter was particularly bad, with only 153,000 new FiOS homes.
Seidenberg and CFO John Killian generally blamed the disappointing performance of the entire wireline segment on an economy that is not showing the most essential sign of recovery: job growth. Seidenberg said Verizon’s future FiOS promotions will reflect expectations of continued economic problems in 2010.
So instead of trying to buy market share by “overheating” the market, is Verizon willing to be the market tortoise, building share slowly and steadily? Apparently so.
“We are confident that we are getting the market we want [for FiOS] and that we don’t have to sacrifice profit,” Seidenberg said. “We are not happy that the economy has slowed things down on the business side. We need to offset some of that by not being too aggressive on the FiOS side. We think we are going to get the market, but we are timing it differently. We expect to have a really aggressive focus on our cost structure.”
Some of that is already happening: Verizon pulled its fourth-quarter $150 cash-back promotion in favor of a lower overall cost plan -- an $89 triple play -- intended to lure in customers that Verizon can then upsell, Killian said. The company is counting on the fact that consumers who buy FiOS tend to keep it: Churn rates are roughly 1 percent.
As the FiOS buildout winds down, Verizon is opening up fewer new markets and reducing the hoopla associated with that process, which Seidenberg admitted can “overheat” the competitive market and lead to price-based promotions by competitors.
As for the general economic picture, Seidenberg is fairly gloomy. Business won’t pick up much until late in 2010, especially on the business and wholesale side, he told analysts. But the Verizon chairman expects a better 2011 and will focus on getting his company’s organization and cost structure ready for the next growth spurt.
— Carol Wilson, Chief Editor, Events, Light Reading