Entries in ILEC Voice Connections (3)


Wireline Connections Slide as Video and Broadband Fail to Replace Voice Losses

3Q11 Connections: ILEC Quarterly and Annual Growth Rates 

The overall snapshot for ILEC connections growth in 2011 remains negative, despite some positive trends in broadband and video.  Overall wireline connections have fallen by 3.7% in the year ended September 30, 2011, driven by connections losses at the largest companies. Verizon’s wireline connection total fell by 4.8% YoY while AT&T’s total dropped by nearly 3%. A few smaller companies are still growing, however; the mean change for the sample was +1.5%, although acquisitions were behind the really notable gains.

Through the end of September, the public ILECs lost 10.3% (YoY) of their voice customers, bringing the total down to 91.6m. Over the same time frame, total ILEC broadband connections increased by 10.5%, to just less than 40m and video connections increased by 13.2%, to 13.6m.

On a quarterly basis, total wireline connections fell 1.1% in the period, but broadband growth was less than 1% and video growth was just 2.1%. On the other hand, voice connections fell by just 2.3%, which is slower on an annualized basis than the 10.3% lost YoY.

NTELOS’ whopping 74% gain and Shentel’s 10% increase in wireline connections were acquisition fueled, but a handful of companies did enjoy organic growth.  Notably, Consolidated Communications managed to grow its voice connection base marginally YoY and posted a 2.6% organic increase in total connections.


Broadband Share of ILEC Connections Nears 20%

3Q11 Connections: ILEC Connections Mix

While the publicly traded ILECs shed 10.3% of their access lines YoY in 3Q11, wireline voice subs on average still accounted for 50.1% of total connections for ILECs in the quarter. That percentage however is likely to dip below 50% in the near future as more consumers do away with their home phone and the penetration of video and Internet services continues to improve.

Within our sample of ILECs, there are two distinct groups with vastly different connection mix makeups: those with a wireless service and those without. For the seven LECs in our sample that offer wireless service, wireless subs accounted for 61% of connections on average in 3Q11. Aside from the wireless giants—AT&T (NYSE:T) and Verizon (NYSE:VZ)—the LECs experienced minimal growth or stable declines in wireless as a share of total subs over the past two years. Telephone and Data Systems (NYSE:TDS) reported the samples highest wireless percentage of 85.6%, thanks to its majority owned subsidiary US Cellular (NYSE:USM), while at the low end Cincinnati Bell’s (NYSE:CBB) wireless share was 33.4%.

For those without wireless operations, wireline voice connections continued to dominate the service mixes in 3Q11. Wireline voice accounted for a sample high 80.5% of connections at Hawaiian Telcom (Nasdaq:HCOM) followed closely by Fairpoint (Nasdaq:FRP) at 77.2%. Overall, voice connections as a share of total connections on average has slipped 8% from 3Q09 to 3Q11. NTELOS (Nasdaq:NTLS) was the outlier in the sample, expanding its share of voice connections YoY to 26% in 3Q11. The increase was the result of its FiberNet purchase, but in recent quarters its voice share has slipped.

Along with declining access lines, the other near unanimous trend for the public LECs has been their greater reliance on broadband Internet services. On average, broadband subs made up 19.2% of connections for ILECs in 3Q11, up from 18.3% in 3Q10. AT&T and Verizon were the only LECs to report YoY declines in broadband as a share of total connections in 3Q11, but only because the pair grew their wireless subs at a much faster pace. Windstream (Nasdaq:WIN) reported the highest percentage of broadband connections in its mix at 30.9% in 3Q11, followed by Warwick Valley (Nasdaq:WWVY) at 29.9%. At the low end, broadband subs accounted for only 3.9% and 5.7% of connections for TDS and NTELOS in 3Q11.

Video subs once again represented the smallest share of overall connections for the LECs in 3Q11 at 8.9% on average, but for nearly all LECs that percentage is on the rise. With the exception of Shenandoah Telecommunications, which has actually lost video subs since the beginning of the year, all LECs offering a video service reported a higher percentage of video connections in its mix YoY in 3Q11. New Ulm Telecom’s (OTC:NULM) reflected the highest percentage of video subs in its mix at 21.8% in 3Q11, while video subs at NTELOS and Cincinnati Bell represented only 0.6% and 3% of total connections.


1Q11 Connections: ILEC Quarterly and Annual Growth Rates

Broadband Gains Slowing, Video Connections Still Growing for Most

ILEC wireline connections fell just more than 1% in the first quarter, as gains in both broadband and video connections were unable to make up for still-falling voice connections. Out of the 19 companies in our sample, there were five whose overall wireline connections counts increased in 1Q11:  Consolidated Communications (Nasdaq:CNSL), New Ulm Telecom (OTCBB:NULM), Shenandoah Telecom (Nasdaq:SHEN), SureWest (Nasdaq:SURW) and Windstream (Nasdaq:WIN).

Shenandoah’s 2.2% gain was powered by its 6.7% QoQ increase in broadband connections, but its total number of video connections fell slightly in 1Q11, making it the only ILEC to lose video connections. Shenandoah bought cable systems in 2010 (from JetBroadband and Suddenlink Systems) and is working to upgrade those systems now.  Shenandoah was, however, the only ILEC to enjoy a gain in voice connections in the quarter (+2.3%), due to strong growth in voice connections at its cable companies.

On an annual basis, voice connections fell 11.4% on a weighted average basis. A couple of acquisitions skewed the mean, however—NTELOS (Nasdaq:NTLS) and Shenandoah both did deals last year that led to large increases in voice connections.  Overall wireline connections fell by 5% YoY, but the results for broadband and video connections were encouraging, rising 10.5% and 16% respectively.