It sounds like Comcast (NASDAQ: CMCSA) and perhaps Time Warner Cable (NYSE: TWC), Bright House Networks and Cox Communications may be preparing to execute on their MVNO deals with Verizon (NYSE: VZ), and that offering, as rumored, will probably be a Wi-Fi-first mobile service.
During an investor call to discuss the company's third quarter earnings, Fran Shammo, CFO of Verizon, said that Verizon has been notified that the cable companies will execute on the 2011 MVNO deal but said he would not discuss specifics of the agreements. "Obviously the industry is moving. Cable will do what they are going to do and we will do what we will do," Shammo said.
However, he then emphasized Verizon's views on Wi-Fi as a complementary service and not a replacement for LTE. "Wi-Fi will not replace LTE," he said.
The Verizon MVNO agreement with the cable companies stems from Verizon's 2011 purchase of AWS-1 spectrum from Comcast, TWC, Bright House and Cox. The FCC approved the deal in the summer of 2012 and permitted the MVNO agreement, but the cable companies so far have not launched wireless offerings related to the deal.
It's been widely rumored for the past few months that Comcast was planning to execute on its agreement with Verizon and would use that deal as an entry point to launch a Wi-Fi-first service.
In July the Wall Street Journal reported that the two players were renegotiating that 2011 deal because it was signed before shared data plans became popular, limiting Comcast's ability to be creative with its pricing plans. In addition, the terms of the deal also had higher per-gigabyte pricing for wireless data compared to today's rates, which would make it difficult for Comcast to compete in the market.
In other earnings-related news, Verizon's FiOS video service added 42,000 new customers in the third quarter bringing its total FiOS video customer base to 5.8 million. Penetration for FiOS video is 35.6 percent.
Shammo also said that Verizon's skinny bundle offering, Custom TV, continues to get traction with customers. Custom TV starts at $55 a month for a basic package that includes broadband and 36 basic channels, plus two additional genre-based add-on packages of 10-17 channels, such as "sports" or "kids."
However, he added that the company will continue to support Custom TV despite its current legal disputes. In April, ESPN filed suit against Verizon over Custom TV claiming that Verizon was "unfairly depriving" it of "the benefits of its bargain."
Shammo noted that the Custom TV bundle, which is $20 cheaper than a normal FiOS video bundle, will provide incremental margin gain for the company because it has fewer programming/content fees.
Here's a breakdown of other key metrics for the third quarter:
Revenue: Verizon had total third quarter operating revenue of $33.2 billion, a 5 percent increase over third quarter 2014. However, this includes results from AOL. Comparable year-over-year revenue growth excluding AOL would have been 3.1 percent. Wireline revenue was $4 billion, up 2.8 percent year-over-year.
FiOS Video: FiOS revenue totaled $3.4 billion for the quarter, up 6.2 percent from third quarter 2014. Verizon added 42,000 new FiOS video connections for a total of 5.8 million FiOS video customers and the end of third quarter. Penetration for FiOS video was 35.6 percent.
FiOS Broadband: Verizon added 114,000 new FiOS Internet connections for a total of 6.9 million FiOS internet customers. About two-thirds of customers subscribed to Quantum, which provides 50 Mbps to 500 Mbps speeds. The highest growth rate is in the 75 Mbps tier.
Frontier acquisition: Verizon is selling wireline assets in non-contiguous states of California, Florida and Texas to Frontier Communications and hopes to close on that deal in the end of the first quarter of 2016.
- see this webcast (reg. req.)
- see this Verizon release
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