While obsession over their respective
iPhone numbers grabbed the limelight, it was mostly the same
script for AT&T and Verizon Communications: They continued
to pack on TV and broadband subscribers as their wireline
phone businesses kept shrinking.
Together, the telcos added 410,000
video subscribers in the first three
months of 2011, many certainly peeled
away from cable. Th ey also combined to
lose about 1 million voice lines.
AT&T netted 218,000 TV subscribers
in the period and 175,000 wireline
broadband customers. Verizon added
192,000 net new FiOS TV and 207,000
FiOS Internet customers, although analysts
questioned whether that growth
will taper off now that the company’s fiber-optic buildout is winding down.
“FiOS — as expected — is slowing in terms of homes passed,”
Jefferies & Co. analyst George Notter wrote in a report. FiOS
TV service is now available to 12.6 million homes, up from 11.5
million a year ago.
As Sanford Bernstein senior analyst Craig Moffett put
it in a research note, “The question from here is whether
growth can be sustained after the available [FiOS] footprint
has reached full maturity.”
Nevertheless, both Verizon and AT&T are now significant
pay TV players, with 3.66 million and 3.21 million subscribers,
respectively. That puts them on either side of Cablevision Systems,
which — with the addition of Bresnan Communications
— counted 3.31 million basic video subs at the end of 2010.
Revenue for Verizon’s FiOS fiber-optic services to consumer
retail customers grew 23.7% over the year-ago period, to about
$1.8 billion. That’s approximately 54% of consumer wireline
revenues in the first quarter of 2011, versus 45% a year ago.
AT&T’s U-verse video, voice and data services in the first
three months generated about $1.5 billion in revenue, representing
about $6 billion on an annualized basis, AT&T said.
Still, that’s only about 10% of AT&T’s total wireline segment.
Verizon’s wireline margin was 23.6%, compared with
21.1% in first-quarter 2010 — the fourth consecutive quarter
of sequential margin expansion. AT&T, by contrast, reported
a wireline segment margin of 21.9% for the first quarter, down
from 23.0% in the year-ago period.
Verizon’s “strong margin results stand in stark contrast to
AT&T’s weak margin results in wireline yesterday, and will fuel
anew the questions [about] whether Verizon’s FiOS plant puts
Verizon on a better trajectory than AT&T’s U-verse,” Moffett
said. Currently, he rates Verizon “underperform” and AT&T
“outperform,” based on valuation.
The storyline many investors were following was how well
AT&T fared on the iPhone front, given that Verizon Wireless
began selling the smartphone during the quarter.
Verizon Wireless — the joint venture with Vodafone —
activated 2.2 million iPhone 4 smartphones in two months.
AT&T held its own, with 3.6 million iPhone activations and
flat iPhone subscriber churn, but had only 62,000 net new subscribers
on contract-based plans (down 88% from a year ago
and a record low).