SOURCE: Pike & Fischer

July 10, 2007 17:45 ET

FiOS Boosts Verizon's Competitive Strength, but Also Its Investment Risk, Pike & Fischer Concludes

SILVER SPRING, MD--(Marketwire - July 10, 2007) - Though Verizon's FiOS service has so far shown healthy subscriber growth, the company continues to face substantial financial risks associated with its plan to pass 18 million homes with fiber-optics, a new report from Pike & Fischer concludes.

The 36-page P&F financial analysis cites challenges Verizon faces as it rolls out FiOS as an alternative to cable's expanding "triple-play" bundles. For example, it takes Verizon far more time and money to roll out FiOS TV than it does for cable operators to deploy digital phone service, P&F consulting analyst Mitchell Shapiro points out.

The report suggests Verizon is spending so much on FiOS that it could take a decade or more for the company to pay back its investment should it fall considerably short of its market-penetration goals. Alternatively, if FiOS exceeds its penetration goals by 10% and generates strong per-subscriber revenues, Verizon could see payback in just four to five years.

"The tradeoff for Verizon's large FiOS investment is that it provides technical capabilities to outperform cable in terms of capacity and services," Shapiro says. "Verizon's return on that investment will depend in large part on how well it leverages those capabilities in an increasingly competitive market."

The analysis considers potential growth scenarios for FiOS availability, subscribers, revenue and margins, and their likely impact on Verizon's investment payback and the revenues of its cable competitors. It also considers key elements of Verizon's FiOS strategy, cable's competitive response, and potential impacts of third-network competitors and Web-based services.

Pike & Fischer, a BNA company, offers a host of legal and business information products covering the telecommunications industry. This new report, "Verizon FiOS Economics, Prospects and Impacts," is priced at $799 and can be purchased at www.broadbandadvisoryservices.com. To arrange for analyst commentary or to request a briefing or executive summary, contact Scott Sleek at 800-255-8131 / ssleek@pf.com.

For more information about Pike & Fischer's Broadband Advisory Services, visit www.broadbandadvisoryservices.com or contact Jonathan Wentworth Ping at 212-576-8741 / jping@pf.com.

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