Verizon gains 135K FiOS TV and 173K FiOS Internet subs in Q3 2013

Time Warner Cable - CBS dispute may have contributed to FiOS TV growth
Tools

Verizon (NYSE: VZ) said it picked up 135,000 FiOS TV and 173,000 FiOS Internet subscribers in the third quarter, while it lost 117,000 DSL customers.

FiOS TV subscriber growth slowed compared to the second quarter, when it gained 140,000 FiOS TV customers. But FiOS Internet net additions improved compared to the 161,000 it reported in Q2. Its performance was also an improvement compared to the third quarter of 2012, when it gained 119,000 FiOS TV and 136,000 FiOS Internet subscribers.

Time Warner Cable's (NYSE: TWC) recent dispute with CBS Corp. (NYSE: CBS), which left subscribers in New York, Los Angeles and Dallas unable to watch CBS and Showtime Networks for 32 days, may have helped Verizon grow its FiOS TV subscriber base. CFO Fran Shammo told analysts on Verizon's earnings call that some of the FiOS TV net subscriber additions "came from disputes."

Verizon, which launched FiOS in 2005, counted 5.9 million FiOS Internet subscribers at the end of the third quarter, with a penetration rate of 39 percent in markets where it is available. It had 5.2 million FiOS TV subscribers, with a penetration rate of 35 percent, Shammo said.

Verizon has seen increased sales of its FiOS Quantum broadband product, with more than half of sales for FiOS Internet coming from subscribers who take packages offering speeds of 50 Mbps or faster, Shammo said. Quantum has tiers ranging from 50 Mbps to 500 Mbps.

While Verizon has halted construction of its FiOS network in new markets, the company is converting copper plant to fiber in areas where it has FiOS franchises in order to expand its FiOS footprint. Verizon converted 80,000 customers from copper to FiOS in the third quarter and is on track to exceed its target of converting 300,000 customers in 2013, Shammo said.

Verizon initially offers customers whom it converts from copper to fiber FiOS Internet at the same price of its DSL service, and within five to six months, it steps up marketing efforts to sell those customers FiOS TV, Shammo said. Verizon has seen a conversion rate of 30 percent once it pitches the former DSL customers FiOS TV, he added.

Average revenue per unit (ARPU) in FiOS homes was $113 in Q3, up 8.7 percent compared to this time last year. Verizon said its wireline business saw consumer revenue increase 4.3 percent to $3.7 billion and that FiOS revenues jumped 13.4 percent to $2.8 billion.

Verizon posted $30.3 billion in total operating revenue in Q3, including its Verizon Wireless business, which was a gain of 4.4 percent compared to the third quarter of 2012. It posted adjusted earnings per share of 77 cents, which was an increase of 20.3 percent.

For more:
- see the earnings release

Related articles:
Shammo: Verizon Wireless joint innovation venture with Comcast, TWC 'has been terminated'
McAdam: FiOS Media Server will 'eliminate the need for coax' and speed installs
Subscriber gains drive FiOS revenues up 15.1 percent in first quarter
Verizon tops J.D. Power residential Internet satisfaction survey