Broadband, Wireless Spur Verizon Results

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Strong additions in its broadband and wireless businesses helped to offset a drop in local-access lines that, coupled with costs associated with FiOS, caused earnings to drop at Verizon Communications Inc., which released first-quarter numbers last week

Verizon earned $1.6 billion during the quarter, compared with $1.8 billion in the year-earlier quarter. The drop was attributed to costs for employee relocations and integration costs related to the acquisition of MCI Inc., early debt retirement, accounting changes and fiber costs for FiOS.

Operating revenues bounced up 25.1% in the quarter, totaling $22.7 billion versus $18.18 billion in the first quarter of 2005. But operating expenses totaled $18.9 billion, a 27.6% increase compared with the same quarter last year.

Verizon’s wireline-broadband business -- which includes digital-subscriber-line and FiOS fiber-optic customers -- added 541,000 net connections in the first quarter, bringing the total to 5.7 million.

Verizon’s FiOS fiber-to-the-premises services are continuing to expand, with the network now passing 3.6 million homes and businesses. Average penetration rate stands at 9% in markets where the telco has been selling FiOS data services for at least six months, on pace toward the carrier’s goal to reach 30% penetration in five years.

Verizon FiOS TV franchises now reach more than 1 million homes passed in nine states, with active sales of the TV service now under way in seven states.

In the Florida, Texas and Virginia markets where FiOS TV has been marketed for at least four months, penetration rates range from 9%-12%, also in line with the telco’s target of 20%-25% penetration in five years. In FiOS TV’s original Keller, Texas, market, the penetration rate stands at 24%. Temple Terrace, Fla., is at 16%; Herndon, Va., at 10%; and Massapequa Park, N.Y., at 6.5%.

Chief financial officer Doreen Toben acknowledged that while its buildout was on track, its subscriber count needs work. “We need to do more work on the connected side,” she said. “We’re not where we need to be.”

Toben said 60% of subscribers are taking advanced set-tops -- either digital-video recorders or HD -- and 80% of FiOS TV subscribers are in triple-play packages.

The other half of Verizon’s TV play is its co-marketing relationship with DirecTV Inc., and that partnership netted 415,000 customers, a 66,000-subscriber increase from the first quarter of 2005.

But as with fellow regional Bell operating companies BellSouth Corp. and AT&T Inc., Verizon saw its total switched-access-line count drop yet again, down 6.9% to 48 million compared with the prior first quarter. Gains in residential wireline-broadband connections more than offset that loss, according to the company.

Verizon Wireless was once again a strong horse in the company’s stable. It added a record 1.7 million new customers for the quarter, bringing its subscriber head count to 53 million -- a 16.7% jump compared with totals during the first quarter last year. Churn, meanwhile, dropped to a record low 1.18%.

In franchising news, Verizon said it received preliminary approval to offer video service in Baltimore County, Md. The full county council will vote on the matter May 15. The company also received a franchise for Lansdale, Pa.

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