FiOS carries Verizon to higher wireline consumer revenues; Sub growth slows

Verizon's (NYSE: VZ) 2.5 percent year-over-year second-quarter wireline consumer revenue increase--"the highest in several years," as the carrier said in its official earnings release--came mainly thanks to a still-growing FiOS business.

Sixty-five percent of wireline revenues were generated by FiOS, which grew its revenue base, from $2.027 million in the second quarter of 2011, to $2.380 in 2012.

The flip side of the coin is that FiOS' momentum is showing signs of slowing. The service provider added only 120,000 FiOS video subs this quarter, compared to 184,000 for the same period a year ago and less than what some analysts had predicted even during a traditionally slow quarter for subscriber growth.

While that brought the total number of video subs to 4.5 million, Barclays Capital analyst James Ratcliffe had predicted the service provider would add 150,000 FiOS TV subs, according to The Hollywood Reporter.

Still, the flagging wireline business seems to have been re-booted by FiOS. Although second quarter operating revenues declined 3.1 percent year-over-year, to $9.9 billion, customer revenues were up 2.5 percent and consumer ARPU for wireline services hit $100 for the first time—reaching $100.26—which was an 8.5 percent improvement over 2011.

FiOS did even better with ARPU hitting more than $149 in the quarter and FiOS services producing 65 percent of consumer wireline revenues, the company said.

"Approximately 70 percent of FiOS consumer customers have purchased a 'triple play' of phone, Internet and TV services," the carrier said in its earnings announcement.

FiOS penetration increased from 33.9 to 36.6 percent and FiOS video penetration grew to 32.6 percent, from 29.9 percent. Verizon said it had 8.8 million broadband connections at the end of the second quarter--up 2.6 percent year-over-year--and that the FiOS network now passes more than 17 million premises.

The lower FiOS numbers could also have an impact on other Verizon business--the purchase of wireless spectrum from a consortium of cable operators known as SpectrumCo--which includes Comcast (Nasdaq: CMCSA), Time Warner Cable (NYSE: TWC) and Bright House Networks--and standalone Cox Communications and especially a proposed joint marketing agreement between those entities.

Federal regulators and others have been looking at how a close working relationship between Verizon Wireless selling cable services and cable operators selling Verizon Wireless would impact FiOS and its ongoing purpose of providing a competitive alternative to cable.

For more:
 - see the Verizon release
 - read the Hollywood Reporter story

Related articles:
Justice puts kibosh—for now—on Verizon-cable spectrum deal
Will Verizon's new speed tiers, bundled options make cable jump?
Verizon positions data speeds atop the FiOS bundles pile

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