Verizon focuses on building a cable TV business; accepts decline of its landline phone business

According to a recent NY Times summary of comments made by Verizon CEO Ivan Seidenberg at an investor conference on Thursday, Verizon is focusing on building a TV business (through its fiber optic TV service called FiOS) rather than investing in landlines when it comes to the “fixed-line” business.  Telephone companies like Verizon and AT&T have experienced subscriber losses in the landline phone business as customers adopt digital internet phones (e.g. VoIP) through cable providers or third-parties like Vonage.  Additionally, many customers are simply relying on mobile phones rather than landlines.

Despite Verizon’s new focus, the landline business still contributes slightly more to Verizon’s value than the FiOS TV business.  We estimate that Home & Small Business Landlines constitute 8.3% of the $38.35 per share Trefis price for Verizon compared to 7.9% for FiOS Fiber Optic TV Service.  This is due to the landline business having a large historical customer base amongst both households and small businesses; albeit both customer bases are declining.

Verizon’s FiOS TV offering, available to households and businesses alike, is most likely to be adopted by households rather than businesses since the percent of businesses that need TV service is only a fraction of those that need a phone line.  We’ve estimated that Verizon’s FiOS market share amongst the 104 million US pay TV (cable, satellite, fiber) households is currently 3% and that share will rise to 8% by the end of the Trefis forecast period.

Within Verizon’s content on our platform, you can see how FiOS Fiber Optic TV Service could become more valuable than Home & Small Business Landlines if FiOS TV Market Share is higher than the Trefis forecast.