Wireline Voice Losses Outpace Fiber Growth
The steady decline in wireline connections continued for ILECs in 2Q11, as overall connections fell around 1% for the publicly traded LECs QoQ. Second quarter adds of broadband and video connections could not make up for the 1.8m loss of wireline voice connections.
ILECs across the board experienced QoQ wireline losses in 2Q11 with the exception of slight gains reported by CenturyLink (NYSE:CTL) and SureWest (Nasdaq:SURW). CenturyLink’s overall gain was fueled 1.4% QoQ growth in video connections, while SureWest added broadband and video subs.
The smallest LEC in our sample, Warwick Valley Telephone Company (Nasdaq:WWVY), experienced the sample's largest percentage loss of wireline connections in 2Q11 (1.9% QoQ), driven by a 3.2% drop in voice connections. Meanwhile, the largest LEC by connections, AT&T (NYSE:T), also lost approximately 3% of its voice connections in the quarter and accounted for 86% of the net wireline losses.
Growth in fiber optic video fueled the largest wireline gains in 2Q11. Cincinnati Bell (NYSE:CBB) reported 10% connections growth in its “fioptics” video services, while NTELOS’ FTTH video customer base grew 5.2% in the quarter.
The annual wireline growth trends in 2Q11 were merely an extension of the quarterly results. On a weighted average basis wireline voice connections fell 10.7% on the year, while broadband and video connections have grown 10.9% and 15.4% YoY.
The main area of wireline growth for both small and large ILECs has been in fiber based services. NTELOS (Nasdaq:NTLS) increased its wireline connections 75% YoY, using M&A to expand its fiber services, and now is in the middle of a FTTH build in Virginia. Verizon and AT&T have experienced wireline losses overall, but are increasingly reliant on their FiOS and U-verse FTTX services for growth. Elsewhere, Cincinnati Bell has invested $48.1m in its fiber optic network thus far in 2011, and SureWest plans to extend its FTTH services to 15.5k homes by the end of the year.