Verizon says FiOS buildout may exceed plans

NEW YORK Tue Jun 10, 2008 3:43pm EDT

Denny Strigl participates in a round table discussion at the Cellular Telecommunications and Internet Association (CTIA) trade show in Atlanta, Georgia March 24, 2004. REUTERS/ Tami Chappell

Denny Strigl participates in a round table discussion at the Cellular Telecommunications and Internet Association (CTIA) trade show in Atlanta, Georgia March 24, 2004.

Credit: Reuters/ Tami Chappell

NEW YORK (Reuters) - Verizon Communication Inc (VZ.N) said on Tuesday it could build out its all-fiber Internet and video network to more than its target of 18 million homes by the end of 2010, despite a weaker U.S. housing market and softer consumer spending.

Verizon President and Chief Operating Officer Denny Strigl said the company could expand FiOS, delivered over an advanced network that will cost more than $20 billion to build, at a faster pace than the original plan without a big hike in spending.

"We think we can take our target up. But we're looking at that right now, in terms of the overall economics of doing that," he told a Deutsche Bank conference in New York.

"We'll pass 12 million by the end of this year, 15 million the next, 18 million the next. I think even within that same time period, there may be some upside for us in number of homes passed without significantly changing the capital requirements."

FiOS competes with cable service providers' bundles of phone, video and Internet. Analysts say FiOS generally offers faster Internet service than cable.

In addition to the time it takes to connect the fiber network through communities and individual households, the FiOS build-out has been reined in by the slow pace of gaining regulatory approval to sell video services.

In areas where it has connected the FiOS network but does not yet have a video license, Verizon offers high-speed Internet and phone services, as well as a bundle including satellite video services through a partnership with DIRECTV Group Inc (DTV.O).

SHRUGS OFF WIRELESS WORRIES

Strigl also said the weaker U.S. economy was not hurting Verizon's wireless business, and shrugged off concerns of the competitive threat of Apple Inc's (AAPL.O) new iPhone.

Verizon, together with Vodafone Group Plc (VOD.L), owns Verizon Wireless. The unit is currently the No. 2 U.S. wireless carrier but is set to overtake AT&T Inc (T.N) for the top spot if its acquisition of rural wireless carrier Alltel goes through.

AT&T is the sole carrier for the iPhone, but Strigl said sales of Verizon's high-end phones have risen since the iPhone's introduction as customers looked for smarter handsets.

"Of course, we continue to be very alert to what Apple does. They certainly are a trend setter in the industry. But I think overall we benefit from that," he said.

AT&T has said it plans to subsidize the price of the latest iPhone, betting that it would help boost its data services and win customers from rivals like Verizon Wireless.

Asked about such competition and pricing pressure, Strigl said he was not seeing a price war yet, but that there could be more "skirmishes" such as the recent flurry of unlimited pricing plans.

Verizon Wireless' offer earlier this year of unlimited calls for $99.99 a month was followed by a similar move by AT&T.

"I can tell you today that at the high end we are experiencing a quadrupling of the gross adds that we have seen, and a reduction in the churn rate at the high end. So we don't think that plan was at all a price war," he said.

Verizon shares were down 1.2 percent at $37.47 in afternoon trade, while AT&T shares were down 1.0 percent at $37.18

(Editing by Leslie Gevirtz)

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