Verizon adds 68K FiOS internet subs in Q4, but DSL losses take toll on overall broadband base

Verizon
By factoring in the DSL subscriber losses, Verizon lost a net 68,000 high-speed Internet subs during the fourth quarter, and 282,000 for all of last year.

Verizon reported decent FiOS internet growth in 2016 as the telco ramped up available speeds and new tiers, but the loss of 282,000 traditional copper DSL customers put a dent in the telco's overall broadband subscriber base. 

FiOS continues to be the main star in Verizon’s consumer wireline portfolio with revenues growing 4.4%, to $2.9 billion, up from fourth-quarter 2016 with fourth-quarter 2015. Full-year FiOS revenues were $11.2 billion in 2016, up 4.6% compared with 2015.

Customers’ thirst for higher broadband speeds drive FiOS growth

In the markets where FiOS is available, Verizon is giving cable a competitive run for their money by offering a number of symmetrical speed tiers that range from 50 Mbps to 500 Mbps.

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Matthew Ellis, EVP and CFO, told investors during the fourth quarter earnings call that the telco’s array of FiOS speed tiers are resonating with customers.

“FiOS revenue growth was primarily driven by an increase in the total customer base and strong demand for high internet speeds,” Ellis said.

During the quarter, Verizon added 68,000 new FiOS internet net customers and 21,000 new FiOS video customers, falling short of analyst expectations. Wall Street analysts expected Verizon to add 83,000 FiOS internet and 31,000 video subscribers.

However, FiOS internet subscriber growth is much lower than the 99,000 new FiOS subscribers it added in the fourth quarter of 2015.

For the full year, Verizon added 59,000 FiOS video subscribers and 235,000 FiOS broadband customers, down from 182,000 video users and 350,000 broadband subscribers added in 2015.

Total broadband subscribers for 2016 declined from 1.7 million subscribers in 2015 to 1.4 million subscribers.

By factoring in the DSL subscriber losses, Verizon lost a net 68,000 high-speed Internet subs during the fourth quarter, and 282,000 for all of last year.

As of the end of 2016, Verizon said it had a total of 5.7 million FiOS internet connections and 4.7 million FiOS video connections.

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By launching FiOS service in Boston and its new Instant Internet 750 Mbps tier, Verizon is hoping to enhance its FiOS subscriber base. The Instant Internet tier is currently available in New York, New Jersey, Philadelphia, and Richmond, Virginia, with other markets soon to come this year.  

“Our One Fiber initiative in Boston is progressing as expected and we launched consumer and business customers late in the fourth quarter,” Ellis said. “We continue to innovate with our FiOS platform using our fiber assets FiOS and earlier this month we introduced Instant Internet, which offers upload and download speeds of 750 Mbps.”

Despite the gains in FiOS, Verizon’s overall wireline revenues declined 3.1% to $7.8 billion year-over-year. Retail consumer revenues grew 0.2%, to $3.2 billion, supported by consumer FiOS revenue growth.

Wireline operating income was $414 million in fourth-quarter 2016, compared with $7 million in fourth-quarter 2015.

Business and wholesale, however, declined again. Verizon Global Enterprise revenues were $2.9 billion, down 4.5% year-over-year from $3.01 billion in the same period a year ago.

Likewise, Global Wholesale revenues declined 7.5% year-over-year to $1.23 billion.

However, Verizon Enterprise Solutions reported it entered new agreements, continued or completed work with a number of clients, including AECOM, ICICI Bank, LBC Tank Terminals Group, Nanyang Technological University and Target Corporation.

From an overall financial perspective, Verizon reported total consolidated operating revenues of $32.3 billion, down 5.6% year-over-year from fourth-quarter 2015.

For the full-year 2016, revenues also declined 4.3% to $120.6billion. Taking out revenues from the wireline businesses it sold to Frontier and AOL, Verizon said that full-year total operating revenues on a comparable basis (non-GAAP) would have declined approximately 2.4 percent.

Verizon reported fourth-quarter 2016 earnings per share (EPS) of $1.10, and full-year EPS of $3.21. Adjusted fourth-quarter 2016 EPS (non-GAAP) was 86 cents. These results fell short of Wall Street analyst forecasts of 89 cents per share.

Verizon has forecast full-year 2017 consolidated revenues to be in line with the 2016.