FiOS TV Pushes Past 1 Million Subscribers

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Verizon Communications said it topped 1 million FiOS TV subscribers in the first few weeks of 2008, although analysts said the uptake on the telco’s fiber-optic services may have been a bit cooler-than-expected.

In the fourth quarter of 2007, Verizon added a net of 226,000 new FiOS TV customers, to stand at 943,000 by year-end. The company said it added its 1 millionth FiOS TV customer earlier this month, up from 717,000 at the end of September.

Verizon was marketing FiOS TV to 5.9 million homes in parts of 13 states by the close of last year, with penetration for the service averaging 16% across all markets. With satellite TV customers signed up via its partnership with DirecTV, Verizon counted more than 1.8 million video customers.

The FiOS fiber-to-the-home network passed more than 9.3 million premises by year-end, and Verizon expects to continue the build-out to pass another 3 million homes this year, president and chief operating officer Denny Strigl said on the call Monday. FiOS Internet was available for sale to 7.5 million premises in parts of 17 states by year-end, with 20.6% penetration rate. 


Still, Sanford Bernstein analyst Craig Moffett, in a research note Monday, said the FiOS results may be “a mild disappointment” to investors.

“The service is clearly attracting more customers, but the rate of acceleration from the third quarter in both video and broadband is modest -- FiOS broadband net additions increased 7% sequentially; FiOS video subscribership increased 12% sequentially from 202K to 226K,” he wrote.

Moreover, Verizon posted a “remarkably weak result” for its legacy digital subscriber line business, Moffett said. The telco added just 19,000 DSL subscribers in the fourth quarter, “far below even our lowball estimate of 92K additions,” he wrote.

Verizon Wireless, a joint venture with Vodafone, continued to ring up subscribers with 1.6 million net customer adds. Total wireless customers increased to 65.7 million, up 11.3% year-over-year.

“I’m happy with the FIOS Internet and TV volumes,” said Strigl on the analyst conference call, noting that in the fourth quarter Verizon shaved two to three hours off the average installation time for FiOS services.

Verizon said demand for broadband and TV services raised average revenue per subscriber by 11% compared with the fourth quarter 2006 in legacy Verizon wireline markets (which exclude former MCI consumer markets), to $59.48 per month.

When asked about the effect of the free high-definition TV promotion, an incentive Verizon is using to drive FiOS subs, Strigl would not provide details. But, he said, “the impact of the free TV offer during the quarter was really not material to our overall costs.”

Responding to an analyst’s question about Verizon’s outlook for the year, Strigl said he and the company’s executives “remain confident about 2008 despite all the noise we’re hearing about the economy.”

As for when FiOS will be available in New York City, Strigl did not directly answer, saying “you will see announcements in several big cities” about the FiOS availability, before adding that “this will have an impact at the end of ’08.” Verizon is currently in franchising negotiations with the city of New York.

Strigl noted that one of the big customer losses for Verizon’s enterprise business in the quarter was a large cable provider, which he did not identify.

All told, Verizon posted $23.8 billion in revenue, up 5.5% from the fourth quarter of 2006, and net income of $1.07 billion, up 3.9% up from $1.03 billion a year earlier.

Verizon recorded a charge of 16 cents per share for severance and other related expenses, the result of workforce reductions that began in the fourth quarter and will continue throughout 2008. The telco had 161,000 employees in its wireline business units at the end of 2007, down from 168,000 at the end of 2006.

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