Last month, Verizon announced they were "nearly done" with FiOS installs, bringing to completion a promise made in 2010. While it would seem from their marketing that Verizon is highly focused on its FiOS business, their actions would suggest otherwise. In fact, their focus is on enhancing their wireless business at any cost.
This week, two of those costs were revealed through the transition of assets in both the wireline and wireless businesses. In the wireline business, Verizon agreed to sell all of its consumer wireline assets and customers to Frontier Communications in California, Florida and Texas for $10.54 billion. The sale includes Verizon FiOS Internet and Video, access lines, DSL Internet and long distance services. It does not include Enterprise or Wireless services. Verizon will continue to operate these services in 9 other states, plus the District of Columbia.
Verizon said in a press release,
Selling wireline operations in California, Florida and Texas to Frontier will concentrate Verizon's wireline operations on the East Coast. Verizon will focus on further penetrating the market for its FiOS business across a contiguous footprint in Eastern states.
We will pretend that Florida isn't an East Coast state, and instead say that focusing their operations in a particular geographical region makes financial sense for the company. Maintaining the aging copper lines, as well as installing fiber lines, is an expensive project; keeping them connected to the rest of the Verizon network, through states that they do not operate within, is even more so.
As the transition begins, likely in the first half of 2016, Verizon customers will become Frontier customers, and approximately 10,000 Verizon employees will make the leap. The two companies have made this transition in the past, with Verizon selling assets in 2009. There were few issues during that period, so it is expected that this period should be just as uneventful.
In the wireless business, the company will be transitioning over 11,000 of its towers to American Tower Corporation for approximately $5 billion. This will leave Verizon with very few remaining corporate towers, but instead will allow Verizon to lease back space on the existing hardware. American Tower Corporation will assume responsibility for land leases and tower maintenance, in exchange for the ability to lease unused space on the towers to other wireless providers. Verizon will have access to all of their former hardware for at least 10 years, with the option to extend to 50 years.
Verizon intends to use $5 billion of its new found money to accelerate their stock buyback program, while the rest of the cash will go to enhancing their other businesses, including wireless. Lowell McAdam, Verizon Chairman and CEO, said,
Our long-standing strategy has been to consistently invest in our networks, improve our customers' experience, and develop new products and services while delivering profitable growth. These transactions will further strengthen Verizon's focus on extending our industry leadership position in our core markets and return significant value to our shareholders.
From this statement, it can be assumed that they consider Wireless and Enterprise to be their "core markets" and wireless to be far less. It is an interesting move, and one that shows that Verizon's belief in its wireless technology is strong. As XLTE continues to expand across the country, Verizon Wireless suddenly has enough capacity to begin to replace copper and even consumer fiber for many customers. Hopefully this will also trigger Verizon to consider lowering the cost of wireless offerings, especially on data.