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Verizon's TV entry comes at a cost

Thu, 12/07/2006 - 6:16am

Copyright 2006 Newsday, Inc.
Newsday (New York)
Bloomberg News
December 7, 2006 Thursday
NASSAU AND SUFFOLK EDITION
From Lexis Nexis

Verizon Communications Inc., the second-largest U.S. telephone company, said investment in its fiber-optic network will have the biggest drag on earnings this quarter and next.

Verizon expects a steady quarterly improvement through 2007, chief financial officer Doreen Toben said at a UBS AG conference in Manhattan yesterday. The company reiterated a forecast for its FiOS network, designed to carry television and high-speed Internet access services to consumers, to be profitable in 2009.

"All of the FiOS metrics are moving in the right direction," Toben said.

Verizon is spending $23 billion on FiOS to compete with cable companies including Comcast Corp. and offer packages of television, phone and high-speed Internet service. About two-thirds of new FiOS customers come from cable providers, with the rest mainly from satellite providers, Toben said.

FiOS will help Verizon increase its average revenue per customer next year, Toben said. In one state where it has been deployed, revenue per user rose 13 percent last month, she said. She also predicted the company will save $110 per line per user from switching customers to FiOS from its older copper network.

Shares of Manhattan-based Verizon rose 37 cents, or 1.1 percent, to $34.95 in New York Stock Exchange composite trading. They had gained 19 percent this year before yesterday.

"We are still skeptical that the FiOS deployment is a profitable venture," said Richard Klugman, an analyst with Manhattan-based Prudential Equity Group. He rates the shares "underweight" and doesn't own them. "The costs are too high."

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