Summary
1. The trouble with certain market analyses is that they assume a stagnant situation. 2. While “operating income from wireline” will continue to fall for Verizon, it is still moving forward in dramatically changing its business structure. 3. Within five to ten years, the RBOC will look like a totally different company.
Analysis
While it is true that “Verizon doesn’t fully own its wireless business,” it is probably only a matter of time before it does buy the rest from Vodafone. More importantly, in terms of the present, Verizon Wireless is fanatic about becoming by far the largest wireless company in the US. Owning 60% of a dominant player is better than full possession of an operation that is neck and neck with its archrival.
Moreover, the original article ignores the fact that its corporate structure has been shifted to fully support its wireless business. The same cannot be said for AT&T.
Verizon is also looking to deal “with high fixed costs” by eventually having the bulk of its wireline assets in its original footprint only along the I-95 corridor. The vast majority of the lines in the western territories of its traditional footprint are up for sale.
The statement that “FiOS customers are almost certainly less profitable than old-fashioned telephone customers,” is simply incorrect. FiOS is primarily being deployed in upper income residential neighborhoods. For years, much of the copper plant has been a money loser for Verizon. Marketing costs for FiOS can be lowered with more partnership agreements with building owners as well as with the continuing nationwide publicity about the service. In addition, the first priority of the “FiOS” fiber is to deliver it to high-margin, Fortune 2000 customers for enterprise applications.
