Verizon makes 50 Mbps its default FiOS speed, but overall growth dips to 99K

Verizon (NYSE: VZ) is now offering 50 Mbps as its default speed tier at a time when overall new subscriber growth is leveling off as it penetrates its existing markets.

Similar to earlier quarters, Verizon reported in the fourth quarter of 2014 of that more FiOS customers were subscribing to 50 Mbps symmetrical FiOS Internet tiers or a higher tier like 75 Mbps.

Fran Shammo, CFO of Verizon, told investors during the fourth quarter earnings call that more of its customers are subscribing to higher data speeds.

"The increasing importance of Internet is evident as more customers are requesting higher data speeds," Shammo said. "At the end of the quarter, more than 70 percent of our consumer FiOS Internet customers subscribed to data speeds of 50 Mbps or higher and we shifted our introductory offers to 50 Mbps."

Shammo said a big part of FiOS Internet growth is coming from subscribers that only want Internet service and not linear TV service. Customer interest continues to grow for Custom TV, which represented about one-third of FiOS video sales in fourth quarter of 2015.

"The demand for FiOS-only is increasing, while we are continuing to see a demand in linear TV," Shammo said.

However, Verizon added just 99,000 new FiOS Internet subscribers in the fourth quarter, much lower than the 145,000 subscribers it added in the same period a year ago.

Even with the decline in overall new subscribers, Verizon reported that the growth of FiOS broadband and video drove fourth quarter wireline consumer wireline revenues of $4.1 billion, an increase of 2.6 percent compared with fourth-quarter 2014. FiOS revenues represented 80.4 percent of the total.

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

Broadband and video: FiOS broadband was again a key factor in Verizon's wireline wireline results. During the quarter, the service provider added 99,000 new FiOS Internet connections and 20,000 new FiOS video connections. It ended the year with a total of 7 million FiOS Internet and 5.8 million FiOS video customers, representing year-over-year increases of 6.3 percent and 3.2 percent, respectively.

FiOS Internet penetration was 41.8 percent at the end of 2014, up slightly from 41.1 percent at the end of 2014. In the same periods, FiOS video penetration was 35.3 percent, compared with 35.8 percent.

Business and wholesale: Verizon reported $3.2 billion in Global Enterprise sales, down 3.3 percent year-over-year from $3.4 billion in fourth quarter of 2014.

During the fourth quarter, Verizon Enterprise Solutions won new contracts with The Kroger Company and Advance Auto Parts and a number of energy companies such as Sunoco and FirstEnergy.

"In the enterprise space, secular and economic challenges remain, but we are seeing stabilization on a constant currency basis," Shammo said. "

Likewise, Verizon reported that it saw similar pain in Global Wholesale where revenues declined .2 percent year-over-year in the fourth quarter to $1.49 billion from $1.5 billion in the same period a year ago.

"While this quarter improved due to seasonal impacts, we remain cautious on the wholesale business and believe that a 4 to 5 percent decline is more indicative on the underlying trend for the full year 2016," Shammo said.

Overall Verizon's operating revenues were $34.3 billion, up 3.2 percent from fourth-quarter 2014. For the full year, Verizon reported total consolidated revenues of $131.6 billion.

Shares of Verizon were listed at $45.11, up 69 cents, or 1.55 percent in early Thursday morning trading on the New York Stock Exchange.

For more:
- see the earnings release
- hear the earnings call (reg req.)

Special report: From Adtran to Zayo: Tracking wireline telecom earnings in Q4 2015

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