Verizon's FiOS Bet Is Paying Off

Verizon Communications reported a strong first quarter for 2009, growing profits and sales over the previous period a year ago. The carrier reported net income of $3.21 billion and increased sales to $26.59 billion. The 12 percent boost in sales from the same period last year was driven in part by gains from Verizon’s acquisition of Alltel. Verizon’s wireless business showed strong growth, as did its FiOS product.

On the wireline side, Verizon’s investments in laying fiber to the home for its FiOS product are resulting in a 13.7 percent increase in average revenue per user, and the take rate on its FiOS service is up over the previous year, despite the poor economy. The carrier strung fiber to about 500,000 premises during the quarter, and added 299,000 net new FiOS TV customers and 298,000 net new FiOS Internet customers during the quarter. It now has 2.2 million FiOS TV customers and 2.8 million FiOS Internet customers. As of the end of the quarter, the FiOS network passed 13.2 million premises. Verizon’s wired broadband connections increased by 252,000 from the fourth quarter of 2008, despite it losing 46,000 DSL-based Verizon High-Speed Internet connections.

On the wireless side, Verizon added 1.3 million subscribers, more than rival AT&T’s 1.2 million added during the quarter, despite AT&T’s lock on the iPhone. However, subscribers using the iPhone provide a much higher average revenue per user (ARPU) than other wireless subscribers on both AT&T and Verizon, which is why Verizon is trying to woo Apple.

Verizon has 86.6 million total wireless subscribers, making it the largest cell phone company in the U.S. Verizon gained 13.2 million of those through the Alltel deal. Data revenue grew by more than 50 percent year-over-year and comprised about 27 percent of Verizon’s wireless service revenue.

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