Verizon 1 Gbps Fios drives 49K gain in Q2 subscribers amid ongoing DSL losses

Verizon sign
Despite Verizon's Fios gains, it’s hard to not to notice the loss of 72,000 DSL subscribers.

Verizon saw its bet on standalone 1 Gbps FTTH paid off in the second quarter with 49,000 new Fios subscribers, helping to offset ongoing DSL subscriber losses to cable competitors.

Matt Ellis, CFO of Verizon, told investors during the second-quarter earnings call that the gains in Fios reflect its customer base’s move and adoption of fiber-based services.

Verizon CFO Image: Verizon
Matt Ellis

“There’s a growing shift in wireline revenues attributed to fiber-based products,” Ellis said. “Organic revenues from fiber-based products grew more than 3%.”

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The telco’s gain in Fios internet subscriber was higher than analyst expectations of 36,000 new subscribers.

“Fios internet gains of 49K were better than the consensus gain of 36K, and likely reflect the early success of Verizon’s pivot to selling standalone 1 GB broadband across their Fios territory, in what is arguably the most compelling (and strategically well-grounded) positioning they have ever had,” said MoffettNathanson Research in a research note.

Despite the Fios gains, it’s hard to not to notice the loss of 72,000 DSL subscribers. The ongoing decline in DSL subscribers is typically the result of two factors: customers defecting either to higher speed Fios or to a cable competitor where Verizon does not offer fiber yet.

“DSL losses of 72K, however, were slightly worse than expectations of -51K, leaving the loss on their broadband base (-23K) more or less in-line,” MoffettNathanson said. “On a YoY basis, their broadband subscriber count has declined by 0.4%.”

Verizon's overall total wireline revenues rose 1.2%, year over year to $7.8 billion.

On a comparable basis, excluding revenues from the XO Communications acquisition and from newly divested data centers, total wireline revenues declined 2.8% year over year.

Here's a breakdown of Verizon's key metrics:

Broadband and video:

Total Fios revenues grew 4.4%, to $2.9 billion, in the second quarter of 2017 over the second quarter of 2016.

In second quarter 2017, Verizon added a net of 49,000 Fios internet connections and lost a net of 15,000 Fios Video connections. At the end of the quarter, Verizon had 5.7 million Fios Internet connections and 4.7 million Fios Video connections, year-over-year increases of 4.4%and 0.6%, respectively.

Business and wholesale:

Similar to earlier quarters, Verizon continues to see pricing and other legacy challenges affecting its enterprise and wholesale revenue results, a trend that was clearly evident again in the second quarter.

Enterprise revenues declined 4.1% on an organic basis to $2.38 billion due to what Ellis said was due to “persistent trends in our legacy products and pricing compression in the marketplace.”

Similarly, wholesale revenues also declined 6.8% to $1.23 billion.

Financials:

Verizon reported consolidated second-quarter operating revenues in of $30.5 billion, which it said were in line with the second quarter of 2016. On a comparable basis excluding divestitures and acquisitions (non-GAAP), consolidated revenues declined 2%.