Paying installers overtime key to Verizon's FiOS growth in Q4
When pay TV providers perform better than usual during a particular quarter, they often credit discounted programming packages and other promotions with helping drive subscriber acquisition and retention. That was the case with DirecTV (Nasdaq: DTV) in the third quarter of 2011, when its decision to offer new subscribers its exclusive "NFL Sunday Ticket" programming package for free if they signed a two-year contract helped it pick up a record 327,000 new subscribers.
And while most cable operators continue to lose basic video subscribers each quarter, Cablevision (NYSE: CVC) has shown that freezing the prices on programming packages can help an operator retain customers and even grow video customers. The MSO picked up 7,000 basic video subscribers during the first quarter of 2012, and it didn't lose any customers during the second quarter.
Verizon (NYSE: VZ) demonstrated this week that there is another key factor that can help a provider grow subscribers: Its ability to get along with unionized field technicians and a willingness to pay those employees overtime. Despite hiking the fees last year on its FiOS TV and high-speed Internet services, Verizon managed to add 119,000 net FiOS TV subscribers during the third quarter and 134,000 FiOS TV subscribers during the fourth quarter.
Verizon CFO Fran Shammo told analysts on Tuesday that the key to the FiOS subscriber growth was paying overtime to FiOS installers, who often spend six hours or more wiring former cable or satellite TV subscribers with FiOS. "In contrast to the second half of 2011, we decided to aggressively meet the increased demand for our FiOS services by authorizing overtime so that we did not lose customers by making them wait until we caught up to the backlog," Shammo said on the company's earnings call.
Signing new contracts with the Communications Workers of America and the International Brotherhood of Electrical Workers was also a factor in Verizon's subscriber growth during the second half of 2012. The company endured a bitter contract dispute with CWA in 2011, including a two-week strike which left it unable to fill a backlog of orders from new FiOS customers. Verizon even fired 40 union workers for misconduct after the strike ended.
But Shammo says the company has resolved its labor woes--at least until the union contracts it signed last fall expire in 2015. "After 400 days of negotiations with our unions, we have a fair and balanced three year agreement that is good for our employees as well as a positive for the business," he said Tuesday.
When Comcast (Nasdaq: CMCSA), Time Warner Cable (NYSE: TWC), Cablevision and Charter Communications (Nasdaq: CHTR) report fourth-quarter earnings next month, we'll likely hear top executives discuss their ability to reduce expenses by relying more on sending self-installation kits to subscribers. While self-installs and automated interactive voice response systems at call centers can reduce expenses, Verizon is showing that assigning staffers to quickly answer the phone and dispatch field technicians and installers can also help a pay TV distributor grow its subscriber base.--Steve