Verizon sells Quantum to 27% of FiOS Internet subscribers

Telco gains 188,000 FiOS Internet and 169,000 FiOS TV subscribers in Q1 2013
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About 27 percent of FiOS Internet subscribers are on one of Verizon's (NYSE: VZ) Quantum tiers, which offer download speeds of at least 50 Mbps, Verizon disclosed on its first-quarter earnings call Thursday.

Verizon said it gained 188,000 FiOS Internet and 169,000 FiOS TV subscribers in Q1. CFO Fran Shammo attributed growth in the Quantum tiers, which Verizon launched in July 2012, to efforts to replace its copper network with fiber in markets where it markets FiOS, including systems in the New York area that saw damage from Hurricane Sandy.

The telco posted net broadband subscriber growth of 99,000 in Q1 as it continues to lose DSL subscribers. But Shammo said Verizon managed to convert 83,000 customers from copper to fiber in Q1, and has a goal of converting 300,000 homes in 2013. The copper-to-fiber migration "provides customers with opportunities to purchase FiOS services, and could result in additional RPU [revenue per unit]," Shammo told analysts.

Verizon posted monthly RPU of $150 in FiOS homes in Q1, and said two-thirds of customers subscribe to a triple-play of video, voice and Internet service. Verizon now counts 4.9 million FiOS TV and 5.6 million FiOS Internet subscribers. The company has a 34 percent penetration rate for FiOS TV in markets where it is available, such as New York, Texas, Florida, Maryland and California. FIOS Internet has a penetration rate of 38.2 percent, Verizon said.

While Verizon still offers a 15 Mbps tier, it is marketing Quantum to FiOS subscribers who have been on its 25 Mbps service when their contracts expire. It also has 75 Mbps, 150 Mbps and 300 Mbps Quantum tiers. Verizon's decision to double the speeds of its most popular tiers drove Comcast (Nasdaq: CMCSA) and Time Warner Cable (NYSE: TWC) to also increase their download speeds.

Verizon said revenue from FiOS services jumped 15.1 percent to $2.6 billion in Q1. It has raised the prices on its programming packages in addition to charging increased fees for set-tops and its high-speed Internet product.

The telco faces increased competition from Dish Network (Nasdaq: DISH), which bid $25.5 billion earlier this week to acquire Sprint (NYSE: S). Shammo said Dish's move affirms Verizon's focus on the importance of marketing a quadruple play of video, Internet and wireless and landline voice services to subscribers. He noted that the quad-play is the focus of Verizon's joint marketing and innovation venture with Comcast, Time Warner Cable and other MSOs.

Verizon posted $29.4 billion in total operating revenues in Q1, including revenue from its Verizon Wireless unit. That was a 4.2 percent increase compared to the first quarter of 2012. Cash flow jumped 26.4 percent to $1.6 billion, and the company posted earnings per share of 68 cents, up 15.3 percent compared to this time last year. 

For more:
- see the earnings release

Special Report: Cable in the first quarter of 2013

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