The largest U.S. mobile operator Verizon Communications Inc. (VZ) has raised the prices for FiOS bundled Internet services while increasing speeds.
Verizon is seeking to deploy faster speeds for the bundled FiOS broadband Internet, television and phone services. The deployment of high-speed data networks will provide the company a competitive edge against major cable operators such as Comcast Corporation (CMCSA), Time Warner Cable Inc. (TWC) and Cablevision Systems Corporation (CVC).
The move will impose a burden on customers to pay an extra $10-$15 per month for bundled television and broadband service. The company will stop offering its lowest speed service plans – 25 Mbps and 35 Mbps – to new customers. Instead, it will offer the new 50 mbps and 75 mbps plans to customers. In addition, there are various bundled plans, which cost more to customers for high-speed data service.
Verizon continued to grow its FiOS base throughout the year on the back of high speed and progressive video offerings. In the first quarter, Verizon added 180,000 and 193,000 new customers to its FiOS Video and FiOS Internet services, respectively. The penetration rate (subscribers as a percentage of potential subscribers) of both FiOS Internet and FiOS Video grew to approximately 36.4% and 32.3%, respectively, across all markets from the year-ago levels of 33.1% and 29.1%.
The U.S. telecom carriers focus more on data rather than voice both in the wireless and wireline businesses with higher speeds deployments. A week ago, Verizon Wireless, a joint venture of Verizon and Vodafone Group Plc (VOD), unveiled new shared data plans for its wireless services, effective June 28 putting an end to the company’s current monthly voice and data plans.
We expect these efforts made by Verizon to lead to improved revenue, high operating margins and greater market share. We are maintaining our long-term Neutral recommendation on Verizon. Currently, the stock retains the Zacks #3 (Hold) Rank for the short term (1-3 months).
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