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Verizon CFO: Looking to Up Margins on Redbox Instant, FiOS

21 Jan, 2014 By: Erik Gruenwedel

Verizon CFO Fran Shammo

Verizon added 92,000 FiOS video subscribers in the fourth quarter

Verizon expects to improve operating margins this year on its wireline business unit, which includes FiOS TV, co-ownership of Redbox Instant with Redbox parent Outerwall and Verizon Digital Media Services (VDMS), among others, according to CFO Fran Shammo.

Speaking Jan. 21 in a fourth-quarter (ended Dec. 31) fiscal call with analysts, Shammo said wireline operating income margin was 1%, up from 0.2% in 2012. FiOS video added 92,000 new subscribers (and 35% market penetration) in the quarter, for a total of 5.3 million subscribers, and 6.1 million Internet subs. Shammo expects wireline margins to improve about 4% given the significant investment in Redbox Instant and acquisition of Intel Media’s online video assets.

“Coming into this year, I said we would be flat given a lot of headwinds that we have from some of these startup products, especially around the Redbox joint venture, VDMS and some other things. So look, we are very optimistic that we can improve this in 2014,” Shammo said.

VDMS is a cloud-based video platform Verizon seeks to market to some 6,000 third party websites.

The CFO said the ownership of Intel’s OnCue over-the-top video platform was cheaper than creating a proprietary OTT service from scratch. Shammo said the focus with OnCue is to accelerate availability of next-generation IP video service to consumers, which will integrate the FiOS video service and help differentiate the brand from the competition.

“As far as we enable this platform to take us over the top, obviously we have our video digital media services that we have been working on for 2.5 years, we have just made two acquisitions (upLynk and CDN EdgeCast) related to that platform,” he said. “So look, we’re positioning ourselves strategically to be in a position to competitively compete around the whole mobile first world and video.”

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