Telco TV

Verizon FiOS Gains In Q1 Offset Chronic DSL, Phone Declines

4/19/2012 8:52 AM Eastern

Verizon Communications has essentially completed its FiOS network buildout but the telco keeps boosting penetration within its existing footprint, adding 180,000 TV and 193,000 FiOS Internet subscribers in the first quarter of 2012 -- more than offsetting declines in DSL and legacy landlines in the consumer wireline business.

FiOS now represents 63% of Verizon's consumer wireline revenue -- or about $2.2 billion for the first three months of 2012 -- up from 54% a year ago. Consumer wireline revenue grew a modest 1.7%, while Verizon's wireline segment posted overall operating revenue of $9.9 billion, a year-over-year decline of 2%. EBITDA margin fell an entire percentage point, to 22.6%, compared with 23.6% in the first quarter of 2011.

As of March 31, Verizon had a total of 5.01 million FiOS Internet and 4.35 million FiOS video connections. FiOS penetration at the end of Q1 was 36.4% for Internet (versus 33.1% a year ago) and 32.3% for video (compared with 29.1% a year ago). Average revenue per unit for FiOS customers topped $148 in the quarter, versus $146 in Q1 2011.

In a move to boost FiOS ARPU even more, Verizon in the current quarter is raising lease fees
for FiOS TV DVRs by 6% -- from $15.99 to $16.99 per month -- and hiking
set-top box rates in the New York metro area 17%, to $6.99 monthly.

However, both DSL and traditional phone line connections continued to shrink. Thanks to FiOS growth, total broadband connections were 8.8 million at the end of the first quarter, up 3.3% year over year. But Verizon lost 89,000 DSL subscribers in the period on a sequential basis, and shed 440,000 total voice connections in Q1 to drop to 23.7 million.

On the wireless front, Verizon Wireless posted another strong quarter with a 8.9% year-over-year increase in retail service revenue, to $14.9 billion -- its highest growth rate in three years. The company's data revenue was up 21.1%, to $6.6 billion. Verizon Wireless ended the first quarter with 93 million total retail customers, including 88 million total retail postpaid subscribers.

Verizon Wireless said it continued the rollout of its 4G LTE mobile broadband network. As of Thursday, the LTE service is available to more than 200 million people -- more than two-thirds of the population -- in 230 markets across the U.S.

Separately, on Wednesday, Verizon Wireless said it plans to conduct an open auction for all of its 700 MHz A and B spectrum licenses, covering dozens of major cities across the country. The company acquired the licenses for about $4.4 billion in 2008.

The carrier, a joint venture of Verizon and the U.K.'s Vodafone, said that auction is contingent on the closing of Verizon's pending $3.6 billion deal to acquire the Advanced Wireless Services spectrum held by cable consortium SpectrumCo, which comprises Comcast, Time Warner Cable and Bright House Networks. In addition, in December Verizon agreed to buy additional AWS spectrum owned by Cox Communications in a deal valued at $315 million. Those deals are in various stages of review by the FCC and the Department of Justice and if approved are expected to close by mid-summer.

Overall for the first quarter of 2012, Verizon reported total consolidated revenue of $28.2 billion, up 4.6% year over year, with net income attributable to Verizon of $1.7 billion (up 17.2%).

Capital expenditures in the wireline segment increased 4.9%, to $1.5 billion for the first quarter. The telco's wireline workforce declined 1.3% on an annual basis, to stand at 90,800 employees at the end of March.


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