Verizon Fans in the Dark on Fiber to Home
Verizon (VZ) wants to ring a new bell.
With its directory business on the block, and the on-again-off-again sale of rural phone lines expected to return to the table after the MCI (MCIP) merger, Verizon is moving ahead with its bold reinvention plans.
But the promise of shedding cash-generating, low-growth businesses to fund an ambitious fiber-optic expansion isn't exactly putting investors at ease.
Verizon shares fell 23 cents to $31.64 in midday trading, reversing earlier gains Monday on word that the company was exploring a directory carve-out. For the year, Verizon is down 22% as Wall Street worries about the cost of realizing the telco's triple play ambitions.The so-called Fios, or fiber-optic cable to the home effort, is designed to deliver advanced services like high-definition video, Net calling and ultrafast Internet access. The company says it will string fiber past 3 million homes this year and 6 million next year, covering roughly a fifth of its territory. But Verizon hasn't offered many soothing words about the estimated $20 billion price tag attached to the fiber project. In fact, investors have been left almost entirely in the dark about the company's progress. A Verizon representative says the company will not discuss its progress in terms of subscriber numbers. "It's a competitive business and we are competing head-to-head with others like cable companies," says the Verizon rep. The Fios service is available in some parts of several dozen communities, and the TV service is up and running in Keller, Texas, and Herndon, Va. The company says it has about 12.4% penetration in markets where it has marketed the service for more than six months. Some analysts say that means about 100,000 Fios subscribers as of the end of September. Based on estimates and analysts' cost projections, Verizon will have spent $3.2 billion on Fios work over the past two years. And assuming the company has 150,000 subscribers by year-end, that would mean Verizon paid about $21,000 for each new customer.
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