Verizon Fans FiOS Higher, As Phone Lines Keep Falling

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Verizon Communications tacked on a net 233,000 FiOS TV subscribers and posted solid wireless gains in the third quarter, but also posted a loss of about 3 million legacy voice customers in the last 12 months.

The telco has more than doubled the FiOS TV business over the past year, standing at 1.6 million customers as of Sept. 30 compared with 717,000 at the end of the third quarter of 2007.

Verizon now is the ninth-largest video programming distributor in the U.S. after the top six MSOs, DirecTV and Dish Network. 

The company expanded the FiOS TV footprint by 1.2 million homes in the quarter, which included the launch in New York City, with the service available to a total of 8.2 million premises. Sales penetration for FiOS TV increased to 19.7%, compared with 15.2% in the year-ago quarter.

Verizon's fiber-to-the-premises network passed 11.9 million homes and businesses throughout its 16-state wireline service territory at the end of the quarter.

Verizon posted a net loss of DSL customers, shedding 96,000 DSL-based subscribers in the period after losing 133,000 in the second quarter. However, the telco noted, the loss was more than offset by the net gain of 225,000 FiOS Internet customers.

Like AT&T, Verizon is fighting the erosion of its traditional landline business. Verizon tallied 21.6 million switched residential access lines as of Sept. 30, a 12% decline from 24.6 million a year ago.

Verizon is trying to grow broadband and TV products to mitigate the shrinking legacy phone service. Broadband and TV now account for 29.1% of consumer ARPU (average revenue per unit) in legacy markets, compared with 27.6% in the second quarter 2008. ARPU among FiOS customers continues to be more than $130 per month, according to the telco.

Wireless continued to drive the telco's financial performance. Verizon Wireless, a joint venture of Verizon and Vodafone, grew retail gross customer additions by 5.3% year over year, to stand at 70.8 million total customers at the end of the quarter.

The wireless company's 2.1 million retail net additions included 630,000 retail customers from the acquisition of Rural Cellular; Verizon expects to have a net loss of approximately 120,000 of these customers under an exchange agreement with another carrier.

Overall, Verizon's total operating revenues were $24.8 billion in the quarter, up 4.1% from $23.8 billion in the year-earlier period. Capital spending was $12.6 billion through the first nine months of 2008, down more than $200 million over the same period last year.

Verizon said it took a $164 million after-tax charge in the quarter for severance, pension and benefit charges recognized primarily as a result of workforce reductions.