Even though Verizon has enabled the entry of a huge competitor from the cable industry into the wireless market, Verizon CFO Fran Shammo said his company has no regrets about signing an MVNO deal with the MSO five years ago.
“We knew what we entered when we bought the licenses several years ago,” Shammo told investors during Verizon’s third-quarter earnings call this morning, his last before retiring from the company after 27 years with it.
“It’s a good agreement — it’s a wholesale agreement. I can’t speak to the economics of what they’re going to do,” Shammo added. “But I can say that the wireless pie continues to grow, and everyone wants a piece of that pie.”
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He said that Verizon’s LTE projects and its entry into 5G will enable it to stay ahead of emerging competition in wireless. “We have a whole new set of growth opportunities,” Shammo said. “We’ll respond where we need to respond and see what happens.”
In 2011, Verizon acquired spectrum from Comcast, Time Warner Cable and several other cable companies in exchange for MVNO rights. Comcast and Charter (which acquired TWC) have activated those wholesale network usage deals and are in the process of launching wireless products. Comcast said its new service will debut next year.
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“Did Verizon clumsily let the fox into the henhouse?” asked analyst Craig Moffett in a report issued to investors shortly after Verizon reported its earnings. “Or did Verizon cleverly overcharge Comcast and its then-peers, saddling them with an uneconomic contract that is above market and uncompetitive?"
“The very nature of this question belies a going-in bias,” Moffett said. “It assumes that Verizon’s MVNO relationship with cable is a zero-sum game. By this line of thinking, Verizon must be either a winner or a loser. That’s a curious starting point for a business relationship that, after all, both parties entered into with their eyes wide open. There is an alternate lens."
For the third quarter, Verizon reported customer growth of 36,000 for its FiOS pay-TV business, which beat Wall Street forecasts of around 28,000 users.
FiOS also outperformed forecasts on internet subscriber growth, adding 90,000 customers during the third quarter.
Verizon said usage of its moribund mobile video programming service, Go90, has increased steadily since a “replatforming” in July around original series like the Ben Affleck/Matt Damon-produced The Runner. In October, the company said, Go90 users spent an average of 30 minutes a day on the platform.
Overall, Verizon reported total operating revenues in third-quarter of $30.9 billion, a 6.7 percent decrease compared with third-quarter 2015.