Verizon Defends FIOS
Arshad Mohammed of The Washington Post has written a must-read article about Verizon.
Verizon CEO Ivan G. Seidenberg is strongly defending the huge investment in their FIOS fiber to the home project.
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“This is almost religious . . . religious with proper financial accounting,” Ivan G. Seidenberg said with a laugh during an interview this week.
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“When it’s all said and done, the growth opportunity here will be far greater than anybody is accepting at this point,” he said,…
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Speaking softly but intensely, Seidenberg said 2006 is likely to be the year in which the Fios investment drags the most on Verizon’s earnings per share, to the tune of 25 to 30 cents.
“You have to spend money to make money,” he said. “It’s fair to say that in ’06 we are hitting about a level of dilution that would be about the maximum, and that from now on out, we’ll start to get better.”
The company’s second-ranking official, Lawrence T. Babbio Jr., the vice chairman and president, said Verizon has made significant progress in cutting the cost of installing fiber — which it initially estimated at $1 billion for the first 1 million homes.
Babbio said this fell by about 30 percent last year and is likely to drop another 15 to 20 percent this year, so that by the end of 2006, “we will probably have cut the cost in half” from the start of 2005. He also said many investors do not grasp how much cheaper a fiber-optic network is to run than the old copper-based system, in place for decades.
[via tech.memeorandum]