Verizon (VZ) has been falling and the stock is down 5% in the past six months. Recently, the company has been showing signs of slowing growth and Verizon Wireless has been the main growth driver. However, the company is looking to increase its presence in another rapidly growing and lucrative segment: Pay-TV services. Verizon is looking to buy Intel's OnCue to add to its pay-TV system. If the deal goes through, it can be a significant growth driver for Verizon.
OnCue
Verizon is currently in negotiations with Intel (INTC) to buy OnCue, an internet based TV system. The deal is expected to go down for about $500 million. This system includes a set of software and an on-screen interface which would allow the customers to access an array of TV channels of their choice and choose from a huge list of movies. Also, the system is equipped with a camera, which would detect the viewer and show programs accordingly.
Verizon could either provide this service to its existing 5.2 million video connections or 5.9 million internet connections. The company could also introduce OnCue as an IPTV service to its 101.2 million mobile customers. An alternative to capitalize on the acquisition of OnCue is to bundle it with the Redbox Instant video service. This service is operated by a joint venture of Verizon and Outerwall and is a separate entity from Redbox. Currently Redbox Instant provides movies only. But if it is bundled with TV programs, it would make a complete entertainment solution for the customers. In the third quarter of 2103, Redbox reported a revenue growth of 7% with its current business. This shows that the market already has potential. If this service is coupled with OnCue, the growth rate could more than double in my opinion.
OnCue: A Game Changer For Verizon?
Studies show that traditional TV customers have been decreasing for about a decade now. Analysts at research firm IHS are of the opinion that there is no light at the end of the tunnel.
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