Verizon may expand FiOS, rural wireless

Verizon Communications is considering expanding its fiber-to-the-premises network beyond its original target of 18 million homes, according to the company’s chief financial officer. And it is also open to acquiring more rural wireless assets without necessarily shedding rural wireline assets anytime soon.

When asked today whether Verizon might expand FiOS beyond 18 million homes, Doreen Toben, Verizon’s executive vice president and CFO, said, “We are currently looking at -- and we will in the middle of this year -- more expansion. To the extent…your expenses are in good shape, there might be some poking. We’re poking it a little bit now to say we think we could expand. So more to come on that.”

Verizon’s FiOS now passes some 10 million homes, and the service -- which now accounts for 25% of its consumer revenue -- is driving average revenue per user in its consumer base from $55.66 a year ago to $61.02 in the first quarter. Verizon expects its video customer base to grow from 1.2 million at the end of the first quarter to more than 4 million in 2010. At the same time, it expects FiOS Internet customers to grow from 1.8 million to more than 6 million.

When asked about possible acquisitions in Verizon’s future, Toben mentioned the rural cellular space in particular as fertile ground. “There’s a lot of opportunity for consolidation there,” she said. “There are some smaller players. If the right thing came along, we’d take a look at it.”

Earlier this year, Verizon acquired the Sacramento, Calif., area wireless business of triple-play provider SureWest Communications.

However, Verizon is unlikely to trim its rural wireline operations any time soon following the recently finalized spin-off of its assets in Maine, Vermont and New Hampshire to Fairpoint Communications.

“The regulatory process with Fairpoint was exhaustive,” Toben said. “It took a very long time. So for right now, at current course and speed, I’d say we’re happy where we are. Not forever. But for right now, I don’t think we’re looking at more [spin-outs of rural lines].”

Verizon is also likely to look at other small acquisitions based on applications, she said, citing the small security services firm it acquired last year as an example.

“We’ll continue to look at little add-ons like that,” she said. “Not huge acquisitions. Probably application-type-driven.”