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Verizon Communications Inc. (VZ) Expands FiOS, 40K Workers Strike

Verizon Wireless (NYSE:VZ)

Verizon Communications Inc. (NYSE:VZ) is all set to roll out its FiOS service in Boston. This comes at a time when a large part of its workforce is on strike. It is worth noting here that a few smaller cities near Boston were already being provided the service, but not Boston itself so far. This will naturally lead to Boston citizens having the option to go for a faster Internet and television service.

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The rollout is expected to start this summer. The firm has plans to allocate more than $300 mn over six years for this expansion. The cables will play their part in supporting the wireless network as well. Boston’s mayor Martin J. Walsh is naturally pleased at the development. He sees this as taking Boston to another level of embracing new tech. While Boston stood on the FiOS waiting list for long, it was one of the first to roll out Verizon’s LTE service in 2010. The firm even opened the Waltham Innovation Center for working on 5G.

Verizon Wireless (NYSE:VZ)

The terms of the agreement with local authorities are similar to what Google does with Google Fiber. The service will not be immediately available across all of Boston, Verizon will start with areas having a high demand.

Once this is done, almost all of Northeastern USA will have access to Verizon’s FiOS service. The network was launched a decade ago and is now present in more than 12 states. The firm has spent about $23 bn on it till date.

The fact that the firm is relying a lot in FiOS is not new. The CFO Fran Shammo had talked a lot about it at the 24th annual Deutsche Bank Media, Internet & Telecom Conference which was held in Florida last month. Fran expressed his belief in the footprint that Verizon has, which will help them sell broadband and TV. He also talked about the room for expansion given the present levels of under-utilization in FiOS, particularly around New York and DC.

How will the Strike Affect the Plan?

Two labor unions in the Northeast are on a strike. In terms of headcount, the figure is indeed one of the biggest in US history, at about 40,000 employees. Most of these belong to the wireline department. Their main pain point is working without a contract for more than half a year so far.

There are also other long-pending demands such as job security, better health care and retirement benefits. Some impact may be visible on the expansion plan because the firm will need manpower in order to set up the systems. In fact the unions themselves have been demanding to rollout the network in other cities.

As a second line of defense, Verizon does claim to have other workers ready to take over, who are not affiliated to any union. For now no other city except Boston is on the radar for FiOS expansion. While not a lot of jobs will be created from the expansion itself, maintenance will indeed require thousands of people. Earlier this month, Frontier Communications Corp had brought the firm’s FiOS assets in California, Florida and Texas for $10.4 bn.

As far as the firm’s wireline business is concerned, FiOS forms the foundation. As per the earnings report for the last quarter of 2015, FiOS made up nearly 80% of the revenue brought in by the wireline business. At present there are 7 mn FiOS internet users and 5.8 mn FiOS TV users.

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