AT&T, Verizon pay-TV subscriber adds miss mark in Q3; will cable stutter, too?

AT&T (NYSE: T) and Verizon (NYSE: VZ) both added subs to their IPTV services in the third quarter but at a slower pace than analysts predicted.

AT&T saw it's U-verse TV service grow by 176,000 subs, enough to bring it to 3.6 million users. However, the number is more than 25 percent behind the 236,000 subs it added in the third quarter a year ago and off 13 percent from the 202,000 subs it added in the second quarter.

Analysts had expected the telco to add between 210,000 and 233,000 subscribers in the quarter, a traditionally strong one for MVPD growth. AT&T's total video subscribers, including bundled satellite TV customers, reached 5.4 million at the end of the quarter.

AT&T said triple-play and quad-play continued to be strong among U-verse customers, with an attach rate near 75 percent. Triple-play ARPU increased 5.7 percent from a year ago to near $170.

Verizon, meanwhile, also saw its subscriber growth slow, as it added just 131,000 new subscribers, more than 35 percent below the 204,000 it added a year ago, and off more than 30 percent from the 184,000 it added last quarter.

Verizon attributed the stall in growth to the labor unrest it saw in the quarter and to the terrible weather the East Coast had to contend with this summer. The two-week strike by 45,000 of its workers in August forced Verizon to suspend installation of new FiOS orders as it focused on repairs and maintenance, the company said, resulting in a backlog of 100,000 orders by the time employees returned to work.

Verizon also said trouble reports following Hurricane Irene and Tropical Storm Lee surged to three times the normal level in nine Northeast and Mid-Atlantic states. About 20 inches of rain fell in some of the telco's service areas, knocking out power and delaying repairs.

Verizon's slower growth in the quarter also surprised analysts, who had forecast between 160,000 and 181,000 adds for the quarter. But, the company said it expected to report a strong fourth quarter: "With the clearing of FiOS installation backlogs caused by the storms and strike, Verizon expects to add at least 200,000 FiOS Internet and 200,000 FiOS TV customers in [the] fourth quarter [of] 2011," the company said.

The combined 307,000 additions could cast a shadow on reports yet to come in from cable operators.

Wall Street had expected this to be a markedly better quarter for pay-TV subscription numbers as more operators rolled out TV Everywhere offerings, slowing subscriber defections.

Pay-TV operators lost 458,000 subscribers last quarter, despite growth by both AT&T and Verizon, but Wall Street expected those losses to slow--or even reverse--this quarter, especially as Netflix (Nasdaq: NFLX) experienced major stumbles in the quarter.

For more:
- see FierceTelecom's take on AT&T earnings and Verizon earnings

Special Coverage: IPTV in the third quarter of 2011

Related articles:
AT&T getting social with U-verse TV interactive apps
In the battle for pay-TV subscribers, IPTV beats cable, satellite; but the economy casts doubt over all
Pay-TV operators see 193,000 subs bolt in Q2; will a stuttering economy make Q3 worse?

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