Verizon CFO: More FiOS Price Hikes Coming

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With FiOS subscriber growth starting to taper off, Verizon Communications has "refocused more on a profit on the FiOS side" and expects to implement additional price increases on bundles in the third and fourth quarter of 2012, chief financial officer Fran Shammo said.

The telco posted net gains of 134,000 FiOS Internet and 120,000 FiOS TV subscribers for the quarter ended June 30 -- well off the pace from the same period a year ago, when the telco had net adds of 184,000 Internet and 189,000 TV subs.

Shammo, on a call with financial analysts Thursday, acknowledged the FiOS adds were lower than anticipated. He said that was due to an unusually high move season in the month of June compared with Q2 2011. "We experienced some additional moves out, and normally in this business it takes us a quarter to recapture the move in," he said.

A "more natural range" for FiOS quarterly net adds going forward will be in the neighborhood of 150,000 to 170,000, or 20,000 to 30,000 less per quarter than the company has been adding in the last few years, Shammo said: "We are on a steady growth pattern, and I believe that we are really focusing in on better margins and acceleration of the top line."

In the second quarter, Verizon hiked pricing for FiOS bundles -- $10 to $15 per month for most customers -- while increasing Internet connection speeds. The telco also raised lease fees for FiOS TV DVRs and set-tops, with DVRs increasing from $15.99 to $16.99 per month and set-top rates in the New York metro area jumping 17%, to $6.99 monthly.

Shammo cited the price increases as helping consumer wireline revenue grow 2.5% in the period. With additional "price ups coming in the third quarter around the bundles and into the fourth quarter," Verizon expects to boost quarterly revenue growth from 2.5% to around 5%, he said.

Meanwhile, Verizon is past the one-year mark on its discussions on new contracts with two unions representing some 45,000 workers. The employees represented by the Communications Workers of America and the International Brotherhood of Electrical Workers walked off the job Aug. 6, 2011, when the previous contract expired. They returned to work about two weeks later, on Aug. 22, and the two sides have been in negotiations ever since.

"When we entered into these negotiations, we knew that this was going to be extremely difficult and very hard negotiations, and it was going to be a long haul not a short haul," Shammo said.

Verizon is not "asking for things that have not already been given to other companies," Shammo added. "These are not new issues for the union. Many of our peer companies are already there." Verizon had 88,600 wireline employees as of the end of June, down from 93,200 a year earlier.

The unions previously had claimed that Verizon's demands would cost union members as much as $20,000 a year. Verizon was seeking a number of concessions from the CWA and IBEW, including requiring workers to pay health-care premiums, having more flexible work rules and freezing pensions while paying matching funds to workers' 401(k) plans.

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