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Verizon & Comcast Team Up

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Verizon Wireless – a subsidiary of  Verizon Communications Inc. (VZ) – and Comcast Corporation (CMCSA) have entered into an alliance to exchange wireless services in markets like Santa Cruz, Capitola, and Watsonville. These services would include a variety of offers and incentive packages pertaining to video, phone, Internet and wireless services.

These offers include Visa prepaid cards valued up to $300, Comcast HD DVR for six months and complimentary 12-month upgrade to Blast!, an Xfinity Internet service provided by Comcast.

The addition of Comcast services in Verizon markets is expected to boost the LTE services of Verizon. In turn, Compacts will benefit from the broad market base of Verizon, which would translate into more business for the former. Beyond the initial launch, both the companies expect to expand their combined services in other key markets including New Hampshire, Ohio, Pennsylvania, Texas, Vermont, Virginia and West Virginia.

With respect to Wireline business, Verizon is committed to improving long-term profitability through product streamlining and process simplification initiatives as well as cost management actions. Verizon expects the enterprise business to contribute more to wireline revenues and profits.

Additionally, Verizon is seeking new ways such as new pricing actions, FiOS Quantum, copper-to-fiber migration and cost-cutting measures to drive FiOS revenue growth and maximize profitability. The new FiOS pricing plans (set-top boxes and planned bundled changes) would accelerate consumer revenue growth for the next several quarters.

Further, Verizon entered into mobile video streaming market with the introduction of “Viewdini” in May this year. The Viewdini allows searching for a particular title, topic, artist or keyword from a variety of the Web's leading content providers – such as Netflix, Hulu Plus, mSpot, broadcaster and movie-studio websites, Verizon’s FiOS, Comcast Xfinity TV and other cable providers.

Apart from the agreement with Comcast, the company will also launch nationwide video rental and online streaming services in collaboration with Coinstar, Inc. (CSTR) in August this year. We believe the entrance into mobile video streaming is highly beneficial to Verizon, as it will attract new subscribers and add a new line of business, thereby drawing additional revenues.

We have a long-term Neutral recommendation on Verizon. The stock retains a Zacks #3 Rank, implying a short-term (1-3 months) Hold rating.

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