Telcos Post Strong DSL Quarter


The three largest local telephone companies reported strong growth in their digital subscriber line businesses during third-quarter earnings calls last week.

SBC Communications Inc., Verizon Communications Inc. and BellSouth Corp. tallied a combined 502,000 new additions — the best quarterly performance this year by the group.

For the regional Bell operating companies that have been beset with losses in local access lines and business-spending cutbacks, DSL has proven to be a bright spot.

BellSouth Corp. added 121,000 subscribers, a jump of 50 percent over last year's 82,000 additions and second-quarter 2002's 74,000 adds. SBC added 226,000 subscribers for its best quarter since 2000, while Verizon added 155,000 for its best period this year.

But overall revenue for the major carriers either dropped or barely nudged ahead of last year's figures.

Revenue for BellSouth's communications group dropped 3.7 percent to $4.62 billion, the company said, due to lower telecom spending and increased competition.

Adjusted for one-time items, the telco's overall profit dropped from $1.12 billion to $970 million.

Dykes said BellSouth would continue to cut staff and leave some businesses, such as Web hosting.

"We will work with other providers," he said. "We won't own the assets."

Long-distance and DSL remained the bright spots. Dykes said the company has taken a 40 percent to 50 percent share of the broadband market in DSL territories.

"DSL showed continued resilience in some segments of the consumer market," Dykes said. "We will continue investing in DSL and data."

Yahoo! Says SBC

SBC added 226,000 DSL customers, for its best quarter since it added 251,000 subs in fourth-quarter 2000. Executives said that was spurred by the telco's September partnership with Web portal Yahoo! Inc.

SBC added 183,000 subscribers in first-quarter 2002 and 213,000 in the second quarter, surpassing 2 million overall subscribers in October. Officials had originally set a two-year target for meeting the year-end goal.

The company said its overall DSL penetration stands at 7 percent; DSL's breakeven point remains at 10 percent.

As with BellSouth, DSL was one of the bright spots for SBC, which reported that overall revenues declined in the quarter, from $13.5 billion to $12.8 billion. Chairman and CEO Ed Whitacre said SBC lost 1.2 million retail access lines in the period, largely due to unbundled network-element platform pricing, which accounted for 751,000 lines.

He attributed the remainder to competition from cable and wireless providers, as well as the economy.

Verizon eked out a slight revenue gain, from $17 billion to $17.1 billion in the quarter, fueled by DSL, long-distance and wireless additions.

But several cable MSOs also reported strong high-speed-data growth. AT&T Broadband added 172,000 cable-modem subscribers in the quarter, its best mark since first-quarter 2001. AT&T had added 140,000 and 137,000 in the first two quarters of 2002, and only 111,000 in last year's third quarter.

Time Warner Cable dipped slightly, to 257,000 third-quarter additions, compared to 278,000 and 271,000, respectively, in the first two quarters of 2002. The company said over 20 percent of its new high-speed subscribers come from multiple ISPs.

TWC did show slight year-over-year growth, adding 252,000 subscribers in third-quarter 2001.