Stocks/Earnings

FiOS Sub Growth Cools in Q2

Verizon Adds 26,000 FiOS TV Subs in Period (Updated) 7/21/2015 10:30 AM Eastern Last updated at 7/21/2015 2:41 PM

Verizon FiOS sub growth slumped in the second quarter of 2015, though the telco said it is seeing strong demand for a new Custom TV offering. .

 

Verizon said it added 26,000 FiOS video subs in the quarter, down from 100,000 in the year-ago quarter, extending that total to 5.76 million and a penetration of 35.7%. Verizon said it saw “higher-than-anticipated demand” for its new, controversial Custom TV packages, with more than one-third of FiOS video gross customer additions opting for it.

 

“While Custom TV adoption has an initial negative impact on revenue growth, it is expected to improve profitability,” the company said.

 

Update: During the earnings call Tuesday, Fran Shammo, Verizon’s CFO and EVP, amplified that point. With Custom TV, he said, “customers are now only paying of what they want to view, and we’re only paying the content providers for what our customers want to view,” he said. “So what you’re seeing is a…decrease in revenue, but you’re also seeing a decrease in content cost that actually improves the profitability.” 

 

Shammo declined to comment on the ongoing litigation between Verizon and ESPN over Custom TV, but didn’t seem overly concerned about it. “We continue to have a great partnership with Disney and ESPN and we will continue to work through that disagreement in our business relationships,” he said, pointing out the ESPN is supplying college sports programming for Verizon’s coming “mobile-first” video service. 

 

The telco also signed up 72,000 FiOS Internet customers, versus 139,000 in Q2 2014, giving it a total of 6.82 million. Verizon ended Q2 with FiOS Internet penetration of 41.4%, up from 40.1% a year ago.  With DSL factored in, Verizon lost 25,000 net broadband connections in Q2, compared to a net add of 46,000 last year.

 

At the end of Q2, 64% of FiOS Internet subs took FiOS Quantum, which offers symmetrical speed tiers ranging from 50 Mbps to 500 Mbps. It saw the highest rate of growth for its 75 Mbps tier, to which 23% of FiOS customers subscribe. Verizon this week launched a 100 Mbps service in New York City, Long Island, and northern New Jersey. New triple-play subs can get it for $89.99, with a two-year commitment.

 

FiOS digital voice sub growth was flat, as Verizon ended Q2 with 4.66 million.

 

Overall FiOS revenues for Q2 rose 10%, to $3.43 million, while total wireline consumer revenues were $4 billion, up 4.5%. Those results include wireline operations being sold to Frontier Communications in parts of California, Florida and Texas.

 

Verizon said it migrated 51,000 customers from copper to fiber in Q2, inching it closer to a full-year goal of 200,000.

 

Verizon posted aggregate net income of $4.23 billion ($1.04 per share), on revenues of $32.22 billion, up from $31.48 billion. Analysts were expecting earnings of $1.01 on revenues of $32.45 billion.

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