Entries in Verizon:VZ (20)


DirecTV and AT&T Narrow the Gap for Top Spots in Video, Wireless

3Q11 Connections: Ten Largest Providers

The top providers by connections in all categories remained the same in 3Q11: AT&T (NYSE:T) in wireline voice, Verizon (NYSE:VZ) in wireless and Comcast (Nasdaq:CMCSA) in video. In wireless and video however, the second place finishers narrowed the subscriber leads in 3Q11, outgaining the top dogs for the quarter.

While AT&T has had a difficult month on the T-Mobile front, the #2 wireless provider outperformed Verizon in 3Q11. It added 2.1m wireless connections in the quarter--surpassing the 100m mark--and outgained Verizon by 700k connections. Overall, the top ten wireless providers added a combined 4.9m connections in the quarter, while the top ten wireline voice providers lost nearly 2m voice lines.

In the video top ten, it was DirecTV (Nasdaq:DTV) making a charge at #1 Comcast in 3Q11. Benefiting from the move to offer its flagship NFL Sunday Ticket package for free, the leading satellite provider added a net 327k U.S. subscribers in 3Q11—its best third quarter gain in six years. DirecTV took nearly 500k subs off of Comcast’s lead, as the leading cableco shed 165k video subs in the quarter. With 19.8m video customers, DirecTV trails Comcast by 2.6m connections. Elsewhere, AT&T and Verizon both experienced around 2.5% growth in video subs QoQ, the strongest percentage growth of the top ten providers.

In wireline voice, the four cablecos in the top ten reported slim QoQ connection gains in 3Q11, while the six LECs in the top ten shed a combined 2.1m connections in the quarter. AT&T accounted for a majority of the losses, dropping 1.2m connections, or 3% of its wireline voice customer base. The #2 and #3 wireline voice providers didn’t fair much better, as Verizon and CenturyLink (NYSE:CTL) lost 478k and 254k subs QoQ in 3Q11.

Looking ahead in the top ten categories, the battle for first in wireless should be interesting to watch. After a strong 3Q11 for AT&T, its acquisition of T-Mobile is now on life support, creating some uncertainty for company. Meanwhile, through its spectrum acquisition from the cablecos, Verizon is making moves to solidify its top spot in wireless.


U-Verse Outgains FiOS in 3Q11

3Q11 Connections: U-Verse vs. FiOS

The duo of AT&T (NYSE:T) and Verizon (NYSE:VZ) added a combined 314k U-Verse and FiOS subscribers in the third quarter, as fiber services continue to provide much needed support for the wireline divisions at both companies.  AT&T led the gains, adding 176k U-Verse subs, good for 5.2% QoQ growth, while Verizon’s grew its FiOS customer base 3.1% QoQ, adding 138k subscribers in 3Q11.  

While Verizon has dominated the headlines over the past week with its $3.6b spectrum purchase from a consortium of cablecos, ceo Lowell McAdam has also made recent statements regarding the future of the telco’s FiOS expansion. Speaking at the UBS Media and Communications Conference this past Wednesday, McAdam confirmed that Verizon will halt its expansion of FiOS services in 2012 after the completion of its current rollouts. Verizon currently passes around 13m homes with FiOS, and plans to reach 16m homes by the end of 2012.

Verizon shelved the idea of additional FiOS rollouts, but its wireline segment has relied on FiOS for top line stability and ARPU growth in recent quarters. FiOS customers generated 60% of Verizon’s wireline revenue in 3Q11, and ARPU for FiOS users was $146—55% greater than Verizon’s overall wireline ARPU of $94.20. Similarly, U-Verse has been the main bright spot for AT&T’s wireline business. The ARPU for U-Verse customers was $170 in 3Q11, and U-Verse subs accounted for over 50% of AT&T’s wireline revenue. U-Verse’s ARPU compares favorably to FiOS’ per customer take, thanks to the fact 75% of U-Verse customers opted for triple or quad play bundles in 3Q11.

While U-Verse measures up better on ARPU, FiOS continues to achieve better penetration. In 3Q11, FiOS’ penetration of homes passed was around 30%, while U-Verse’s penetration was around 25% in service areas in which it has marketed service for at least three years. With AT&T’s fiber builds nearly complete, and Verizon ready to halt FiOS rollouts after 2012, the telcos’ ability to improve penetration in their current markets will determine if their fiber customer bases will continue to grow.

Verizon’s McAdam commented on Wednesday that he’d like to see FiOS penetration around 50% in the future, but delivering an additional 20% of homes passed could prove more difficult after its recent spectrum deal. As part of its purchase, Verizon agreed to cross-market the video services of its competitors, namely Comcast (Nasdaq:CMCSA) and Time Warner (NYSE:TWC), allowing the cablecos to bundle Verizon’s wireless service with their video options, even in FiOS markets.


ILEC 3Q11 Results Summary: Verizon

iPhones and FiOS Continue to Fuel Verizon

The major trends in Verizon’s (NYSE:VZ) growth, financial and stock price performance over the past year can be summed up in two words: “FiOS” and “iPhones.”

Overall, wireless revenues rose 6.1% YoY in 3Q11, to $15b, at Verizon. Fueling the growth, data revenues shot up 20.5% YoY in the quarter to $6.1b. Verizon’s retail postpaid ARPU ticked up 2.4% YoY, but more significantly its postpaid data ARPU jumped 15.7% in 3Q11 to $22.22, moving in lockstep with the overall demand for mobile data.

While the increasing popularity of all smartphones has driven Verizon’s wireless gains, the iPhone is really what has pushed the needle for the company over the past few quarters.  Since unveiling the Verizon iPhone in February, the company has activated 6.5m of the smartphones in fewer than nine months, as it has grown its industry-leading wireless connections to near 108m.

In Verizon’s wireline segment, 3Q11 revenue was down 1.3% YoY to $10.1b, mainly due to a loss of 2m voice connections over the past year. On a positive note, FiOS’ contribution to wireline consumer revenues continues to grow, as it now accounts for 60% of wireline revenue. Verizon’s average take from FiOS customers was $146 for the quarter, 55% greater than the overall wireline ARPU of $94.20. It added 689k FiOS television and 731k FiOS Internet subs in the past year, driving wireline ARPU up 8.8% YoY in 3Q11.

With higher-margin FiOS offerings making up a larger percent of its wireline revenues, and consumers spending more on wireless data, Verizon grew its OIBDA margins 8% YoY in 3Q11, up to 31.6%. It appears poised to finish out 2011 with its second straight year of margin growth, although its OIBDA margins did stumble 3% QoQ in 3Q11 thanks to a $250m impact due to storms and the workers strike over the summer.   

The market has rewarded Verizon’s performance over the past eighteen months, as its stock price has increased 18% over its 1Q10 close. During the same time frame, the S&P 500 has given back 3.4%. Verizon experienced its most significant stock price appreciation in the quarters before and after its iPhone release, jumping 18% from its 3Q10 close to $38.54 a share at the close of 1Q11. It has lost about 5% since, ending 3Q11 at $36.80.

While Verizon remains the top wireless provider in the U.S., some threats to its wireless market share do exist. AT&T posted better gross (5.9m to 5.4m) and net (2.1m to 1.4m) customer adds than Verizon in 3Q11, appearing to have weathered the storm after the Verizon iPhone frenzy in 1Q11 and 2Q11. And armed with the iPhone 4S and unlimited data packages, Sprint also could steal some market share from Verizon.

Preliminary numbers on iPhone 4S users bear out these concerns. According to a Localytics study, Verizon maintains 40% of the iPhone 4 market, but its share of the iPhone 4S has dropped to 32%. Meanwhile Sprint has taken 12% of the 4S market, a majority of which it took at Verizon’s expense.


Wireless Subscriber Trends in 3Q11: Big 3 Still Rule the Roost

And the Winner is…..AT&T Mobility

I have to hand it to AT&T…though Verizon Wireless is generally considered the “quality network” leader and was expected to start handing AT&T its hat once it obtained the iPhone last February, AT&T has fought back admirably and was in fact the top-growth company in the third quarter in terms of both gross and net subscriber additions. AT&T added 2.1m net new customers in the quarter, bringing its total to 100.7m. Churn was a respectable 1.28% and gross additions approached 6m.

Verizon Wireless, already the nation’s largest wireless service provider, added 1.4m net new customers; based on churn of 1.26% monthly, Verizon added almost 5.5m gross new customers. And Sprint Nextel, which continued to rail against AT&T’s planned acquisition of T-Mobile USA in the quarter, added just under 1.3m net new customers. T-Mobile USA hasn’t released its third quarter results yet, but based on comments in parent Deutsche Telekom’s third quarter report we know that T-Mo lost subs in the quarter. T-Mo’s revenue fell by 3.3% in the quarter YoY; since it also reported that growing data revenue led to an increase in average monthly ARPU, we can assume that subscribers fell by more than the 3.3% revenue decline.

And then there’s everyone else. The subscriber numbers are an order of magnitude smaller when we look at MetroPCS, Leap Wireless, U.S. Cellular…MetroPCS grew its base by a paltry 69k, blaming the slower growth on “seasonal factors” and the “weak economy.” Leap Wireless managed to add 10k net new customers which actually gave the stock a boost considering the big sub losses Leap had been reporting. And U.S. Cellular lost another 145k in the quarter, its biggest quarterly loss this year.

Notably, Clearwire added nearly 1.9m net new customers in the quarter. The vast majority of Clearwire’s customers are of course wholesale customers actually added by its estranged step-parent Sprint Nextel. In fact, it looks to me that without the Clearwire 4G sales, Sprint wouldn’t have grown its base at all in the quarter, though the details get murky. Sprint reported a modest decline in postpaid retail subscriber and boasted strong prepaid net adds, but ongoing losses from its Nextel/iDEN side of the business offset much of those gains. Sprint also said that results at its prepaid subsidiaries Virgin Mobile and Boost improved in the quarter.

So, AT&T and Verizon are (not surprisingly) dominant again, particularly in the postpaid segment. Sprint appears to be winning prepaid share, perhaps from T-Mo, but also from Leap and MetroPCS. Sprint’s release of the new iPhone 4s in mid-October, combined with its unlimited data plans, could help it fight back in terms of market share for post-paid customers in the fourth quarter. Remember that neither AT&T nor Verizon offer unlimited data plans any longer.

If we include Clearwire in the mix, AT&T, Clearwire, Verizon and Sprint accounted for 32%, 28.5%, 21.2% and 19.3% of the total net additions in our sample for the quarter—leaving the “also-rans” with negative market share. But considering that Clearwire’s subscribers are also Sprint subscribers, I took a look at market shares excluding Clearwire. In this scenario, AT&T grabbed nearly 45% of net adds; Verizon got just under 30% and Sprint garnered about 27%. Once again, the other public companies lost share to the big three.

I think the biggest takeaway from this exercise is the fact that AT&T continues to be VERY dominant in terms of wireless market share—which could make it tough to get court approval for the pending T-Mo buy. But with T-Mo losing subs, it’s still a mystery to me why AT&T even wants it. Of course, the substantial breakup fee that it will owe to DT is no doubt a factor, but, as I’ve written before, there are better ways for AT&T so spend $39b!


2Q11 Connections: ILEC Quarterly and Annual Growth Rates

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.