FiOS, U-verse add subs, and Verizon looks long on TVE

jimo

It's been a good start to the earnings season for AT&T Mobility (NYSE:T) and Verizon Wireless (NYSE:VZ), which both reported solid earnings and continued growth in their consumer wireline products, especially their Internet and video plays.

AT&T grew its U-verse TV base by 200,000 customers, closing the first quarter with 4 million subscribers. At Verizon, its FiOS TV service added 180,00O accounts to give it 4.4 million subscribers.

Both companies added even bigger numbers to their respective Internet user rolls, with Verizon bumping up some 193,000 subscribers and AT&T seeing a whopping net gain of 718,000 subscribers, bringing its total to 5.9 million users.

The growth comes at a time when hybrid TV offerings--in the form of over-the-top delivery of products like Netflix (Nasdaq: NFLX), Hulu, Vudu and Amazon (Nasdaq: AMZN)--are increasingly gaining traction with consumers.

And, whether you call it Hybrid, Broadband TV or over-the-top, it's here to stay.

Netflix's prolonged fall from grace notwithstanding, it and other companies continuing to nibble--or, in some cases, chomp--at the edges of the pay-TV cookie, are simply generating more buzz than pay-TV providers.

Netflix saw a gain of some 1.7 million subscribers in its most recent quarter. CEO Reed Hastings says he expects the company to add a net 7 million by the end of the year. The company also expects to be back in the black as early as the second quarter and to expand to yet another European market (Spain?) by the end of the year.

Sterne Agee analyst Arvind Bhatia, in a note, said he expects Netflix to have full-year earnings of 2 cents a share, a far cry from the 36 cents a share loss he earlier expected.

The Internet growth that AT&T and Verizon saw in the first quarter may be a harbinger of a technological spring of sorts for the companies. Both will be better positioned to take advantage of over-the-top delivery demands being expressed by consumers.

While AT&T has pushed more of its content online as of late, Verizon has taken a bigger role. Its joint venture with Redbox to combine DVD rentals from the kiosk company with "a new content-rich video on-demand streaming and download service from Verizon" could change its game in a big way.

Remember all of those discussions about virtual MSOs? Intel, Microsoft and Comcast all were mentioned.

You can add Verizon to that list... with a bullet.

A Verizon executive at the recent National Association of Broadcasters convention told me that while the company would continue to push its FiOS buildout in areas it had already established, it wouldn't pass up "opportunities" to expand, especially in the area of TV Everywhere.

Could that include offering a TVE service outside Verizon's own service footprint?

"It's something we've discussed," he said. "We've had lots of discussion about the technology to make it happen, there's lots of interest in the company from a technology standpoint and about other issues that would be involved."

Ah, Spring. --Jim

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