Verizon FiOS video growth slows to 26K subs in Q1, but skinny TV bundles 'exceed expectations'

Verizon (NYSE: VZ) said it only added 26,000 net FiOS video subscribers in the second quarter, a figure that potentially indicates sluggish progress for the overall pay-TV industry during the period.

The two major IPTV services, FiOS and AT&T's U-verse (NYSE: T), had been the fastest growing services in the pay-TV business. But FiOS has been steadily decelerating, down from 100,000 net video additions in Q2 2014 and 140,000 in Q2 2013. Analysts predict the slowing of telecom-based services, the recession of satellite TV and the flat growth of cable will result in significant overall subscriber losses for the overall pay-TV sector in Q2.

Verizon also added only 72,000 FiOS Internet users in Q2, down from 139,000 in the same period of 2014.

Verizon blamed the slow growth on competition in key markets. However, Verizon CFO Fran Shammo said the company's "Custom TV" skinny bundle product "continues to exceed expectations," with a third of new FiOS video subscribers opting for it. 

"It will put pressure on the top line, but will improve our profitability from a programming standpoint," Shammo told investors. "Our customers are only paying for they want to view, and we're only paying our content providers for what our customers want to view."

Shammo refused to comment on the litigation between Verizon and Disney/ESPN over Custom TV. The programmer has sued Verizon, claiming the operator's bundling strategy is in violation of its contracts. However, Verizon's CFO said Disney and ESPN "continue to be great partners," evidenced by ESPN's participation in Verizon's new over-the-top mobile video service, which he said is still on track to launch in late summer. 

"It won't be the full entirety of everything we contemplated, but as the year goes on it will progress," he said. Shammo added that, in addition to helping monetize the new service with its advanced advertising capabilities, Verizon's recently acquired AOL assets will deliver it new programming for the OTT venture, including the Huffpo Live and TechCrunch video components. 

Overall, Verizon's earnings per share of $1.04 for the quarter topped analysts' forecasts of $0.99. 

For more:
- see this FierceWireless article
- visit the Verizon investor relations page

Related articles:
Verizon adds fewer postpaid subs in Q1 than expected, loses prepaid and 3G smartphone customers
Verizon adds 116K video subs in Q4, up 26%
Verizon's Shammo: We believe our 'existing contracts' allow skinny bundles
Moffett: Customers to drop cable TV subscriptions at even faster rate in Q2

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