Verizon FiOS TV Tops Half-Million Mark

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Verizon Communications chalked up a total of 515,000 FiOS TV customers by the end of the second quarter, after adding 167,000 net customers for the video service during the period.

Verizon chief financial officer Doreen Toben, on an earnings call with analysts Monday, noted that the company added a net average of 2,600 new FiOS TV customers per business day during the quarter. In addition, the company saw an increased uptake for the high-speed FiOS Internet service, adding 203,000 net new customers during the period -- 15% more than in the first quarter -- to end the quarter with 1.1 million total FiOS Internet customers.

“Overall, FiOS TV and broadband -- as well as our bundling initiatives -- are improving customer-growth trends,” she said on the call. “Clearly, broadband and video products have proven to be more retentive.”

FiOS TV was being marketed to nearly 3.9 million households by June 30, up from 3.1 million three months earlier. That gave the telco a penetration for the service of 13.2% across all markets, compared with 9% penetration against a potential customer base of 2.4 million at year-end 2006.

With the growth of FiOS customers, according to Verizon, the earnings-per-share dilution from FiOS deployment was 10 cents in the quarter, 1 cent less than in the first quarter of 2007.

As of June 30, Verizon offered FiOS TV to almost 500 communities in 12 states. The telco reported having nearly 1.3 million total video customers, including those provided through a deal with direct-broadcast satellite operator DirecTV. Verizon added 125,000 DirecTV customers in the second quarter.

Verizon continued to lose traditional landline customers, dropping 579,000 retail residential lines during the quarter, but Toben said the rate of loss was lower than in recent quarters and there was a correlation between FiOS rollouts and landline losses.

Meanwhile, the telco also saw lower growth than expected for digital subscriber line, with a net addition of 85,000 subscribers.

Asked on the conference call whether the DSL numbers indicated that Verizon customers were waiting for FiOS, Verizon president Denny Strigl acknowledged that DSL additions were “lighter” than they should have been but said the company was focusing more on FiOS. “As FiOS scales up, we do expect to see a reduction in DSL volumes,” he said.

Strigl added that Verizon moved service and installation representatives who normally handle DSL to handle FiOS in certain markets, including New Jersey, California, Florida and Indiana. “We expect broadband net adds to continue to grow, and we will roll out FiOS just as fast as we can,” he said.

The FiOS network passed nearly 7.6 million households by the end of the second quarter, which Verizon said was on track with the year-end target of 9 million.

As a whole, Verizon reported second-quarter operating revenues of $23.3 billion, 6.3% higher than the same period a year ago, and net income of $1.7 billion (compared with $1.5 billion a year ago).

Verizon Wireless, Verizon’s joint venture with Vodafone, reported a net gain of 1.3 million subscribers to end the quarter with 62.1 million. That included a loss of 300,000 net customer connections from wholesale accounts, primarily due to the bankruptcy of Amp’d Mobile.

At the end of the quarter, Verizon Wireless had launched V CAST Mobile TV service in more than 30 markets. Toben said V CAST subscribers downloaded 25 million music and video files during the quarter, while all wireless customers sent or received more than 28 billion text messages during the period.

Separately Monday, Verizon Wireless announced plans to acquire Rural Cellular -- a provider of wireless-phone services in the 850-megahertz spectrum with about 700,000 subscribers -- for $2.7 billion in cash and assumed debt.

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