The high cost of  FiOS on both the IT side and the marketing side was a concern for several analysts on the call, because it continues to cut into the company's margins and has led to lower EBITDA margins compared to some of Verizon's peers.

    "This is an issue of momentum," said CEO Ivan Seidenberg. "I think first you see momentum on the top line, and then you'll start to see it on the margin line." Seidenberg expects this to happen by late 2007 and early 2008.

    "Overall, webelieve sentiment remains conservative, despite the strong stock performance, on the prospects for FiOS to not simply stop diluting growth, but to transform into a positive growth contributor," writes Banc of America's Barden. Barden also notes that he believes the market will eventually gain appreciation for the inflection in FiOS dilution expected for 2007.

    Shares of Verizonare off $0.74 (1.76 percent) to $41.26 in midday trading.