Stocks/Earnings

Verizon Fios Sheds 13,000 Internet Subs, 41,000 Video Customers in Q2

Work stoppage impacted Fios growth, but says it is now working through install backlogs 7/26/2016 8:08 AM Eastern

As anticipated, a troublesome work stoppage negatively impacted Verizon’s Fios connection growth in the second quarter.

 

Verizon said it lost 13,000 Fios Internet connections and 41,000 Fios video subs in the period, but noted that it has “made significant progress in working through a backlog of Fios installations in June and has since returned to its normal run rate of Fios connection growth.

 

Related: Cable Ops to Come Roaring Out of Q2 [subscription required]

 

Verizon ended Q2 with 14.01 million total Fios digital connections -- 4.63 million Fios video subs, 5.49 million Fios Internet customers, and 3.87 million residential Fios digital voice connections. Verizon pulled in $2.77 million in Fios-related revenues in Q2, up 3.7% versus the year-ago quarter.

 

With DSL factored in, Verizon lost 83,000 broadband connections in Q2, dropping that total to 7.01 million.

 

The stoppage also hurt wireline operating income, as that segment posted an operating loss of $463 million, while generating $1.1 billion in segment EBITDA, down 26.5% year-on-year.

 

Verizon CFO Fran Shammo last month warned of that negative impact of that six-week strike by 46,000 Verizon wireline employees.

 

Verizon said 11% of its Fios Internet base now has speeds of 100 Mbps or more, and that it’s seeing strong demand for Custom TV, the telco’s controversial skinny bundle TV package offering, which represented nearly 40% of Fios video sales in Q2.

 

Verizon, which on Monday announced a $4.83 billion deal to acquire Yahoo’s operating business, noted that it converted its ad-based, mobile-focused go90 OTT video app to the AOL platform.

 

“By acquiring Yahoo, we are scaling up to be a major competitor in mobile media,”  Verizon chairman and CEO Lowell McAdam said, in a statement. “Yahoo is a complementary business to AOL, giving us market-leading content brands and a valuable portfolio of online properties and mobile applications that attract over 1 billion monthly active consumer views. We expect this acquisition to put us in a great position as a top global mobile media company and give us a significant source of revenue growth for the future.”

 

Verizon posted Q2 earnings of $831 million (17 cents per share), down from $4.3 billion or $1.04 per share in Q2 2015, on total operating revenues of $30.5 billion, a 5.3% decrease. Verizon noted that AOL “delivered strong revenue growth” in Q2.

 

On the wireless end, Verizon ended Q2 with 113.2 million retail connections (107.8 million postpaid and 5.4 million prepaid connections), a 3.3% increase aided by the addition of 615,000 retail postpaid net adds, which excluded wholesale device and wholesale IoT (Internet of Things) connections. Verizon ended Q2 with 74.6 million smartphone connections, or 86% of the total phone base. 

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