The suggestion that a more powerful Verizon Wireless (NYSE: VZ) could lead to the demise of FiOS--as first suggested in a FierceIPTV commentary--gained some market cred this week with members of the financial community.
"Verizon's recent agreement to buy out Vodafone's 45 percent stake in their Verizon Wireless joint venture, meanwhile, led Citigroup to ponder whether Verizon would restructure to make its residential business--including consumer services delivered over copper and newer FiOS fiber optic lines--independent," a story in Investor's Business Daily stated.
The speculation centers on several points, not the least of which is Verizon's often lukewarm commitment to FiOS--it's not building out any new markets--and the fact that the carrier is adding $62 billion in debt to finance the wireless buyout.
"With a spinoff or sale of its FiOS and copper residential business, Verizon could unload some debt," the story suggested, noting that Verizon has some history in this space. In 2007, for instance, the carrier sold its Northeast phone lines to FairPoint Communications (Nasdaq: FRP).
The wireline properties might be marketable just based on performance. Customers in the most recent J.D. Power satisfaction ratings gave FiOS high marks as a service and the presence of the TV service, where available, has dented subscriber numbers for cable competitors Comcast (Nasdaq: CMCSA), Cablevision (NYSE: CVC) and Time Warner Cable (NYSE: TWC).
The reverse side of that coin, Moody's Investor Service SVP Dennis Saputo said in the article, is that "wireline operations aren't highly leverageable because they don't generate lots of excess cash flow."
Then there is the possibility that all this speculation is just that--speculation--that will never amount to anything in a regulated environment.
"Regulators probably wouldn't let Verizon walk away from the non-FiOS parts of the network," said Craig Moffett, analyst at MoffettNathanson Research in the story. "Verizon probably wouldn't be willing to sell FiOS if it left them with just the legacy copper. I don't know there is any way to satisfy buyer, seller and regulators at the same time."
- Investor's Business Daily carried this story
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