Verizon to Raise Prices, Cut Jobs

Verizon's CFO tells analysts that the company will raise prices with FiOS and continue to reduce staff to lower costs

Raymond McConville

April 28, 2008

2 Min Read
Verizon to Raise Prices, Cut Jobs

Did you actually believe cable competition would benefit consumers by adding jobs and lowering prices? Verizon Communications Inc. (NYSE: VZ) CFO Doreen Toben set us straight today by telling analysts that the company will once again be raising prices on FiOS in the second quarter of this year.

“We anticipate raising prices for strategic products again in the second quarter,” said Toben during Verizon’s first quarter earnings conference call this morning. Toben was alluding to last year when Verizon made similar price increases to FiOS.

Toben did not say exactly where or by how much FiOS would become more expensive but suggested it could be with “set top boxes, premium channels, or miscellaneous.” Verizon however will keep its introductory triple play offer price of $99, saying that the price is being set by the market. Verizon’s average revenue per user (ARPU) on FiOS currently sits at $129 -- a number Toben says is much higher for triple play packages.

But despite Verizon’s continued success with FiOS uptake and its demonstrated ability to increase average revenue per user (ARPU) with the service, its wireline growth continues to sag while wireless continues to pick up the slack. (See Wireless Fuels Verizon's Q1.)

The company has already eliminated nearly 10,000 jobs within certain wireline services and Toben announced that “ongoing reductions are planned throughout this year.” (See You're Fired and Landline Landslide Will Lead to More Layoffs.) Verizon lost 726,000 residential access lines during the first quarter.

Several analysts during the call expressed concern over Verizon’s declining wireline margins. But COO Denny Strigl waved off the concerns saying that “first quarter margins are typically lower than third and fourth quarter” and that this current quarter was nothing out of the ordinary.

Meanwhile with FiOS continuing to catch on in the markets where it is available, Verizon says it expects the service to be EBITDA positive by the end of this year. FiOS, which is costing Verizon $23 billion overall to install, has been diluting earnings ever since the company began rolling it out. But the trend is starting to reverse itself.

“At this point FiOS is not really diluting on a sequential basis. We expect it to be positive by the end of the year,” said Toben. — Raymond McConville, Reporter, Light Reading

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like