Verizon's FiOS drives up Q4 consumer wireline revenues to $3.8B

Verizon's (NYSE: VZ) fourth-quarter wireline segment success was again driven by FiOS, where revenues rose 14.9 percent year-over-year to almost $2.8 billion as more customers purchased higher speed broadband tiers.    

The increase in FiOS revenues drove up total fourth-quarter 2013 consumer revenues 6.4 percent to $3.8 billion. Consumer ARPU for wireline services were $117, up 10.8 percent year-over-year from the fourth quarter of 2012.

Despite the gains Verizon made with FiOS, the enterprise services segment declined as a result of slower buying patterns from public sector and large business customers.

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

Broadband and video: FiOS continued to be a major factor in Verizon's wireline results. The telco added 126,000 net new FiOS connections and 92,000 FiOS video connections. It ended the quarter with a total of 6.1 million FiOS Internet and 5.3 million FiOS video subscribers, up 11.9 and 11.3 percent year-over-year, respectively.

One of the key trends Verizon saw during the quarter was that 46 percent of its subscribers took one of its Quantum tiers, which offer a choice of speeds from 50-500 Mbps, up from 41 percent at the end of the third quarter of 2013. Overall, Verizon had a total of 9 million broadband connections, up 2.5 percent year-over-year. The telco added 20,000 net broadband connections as FiOS Internet net additions more than offset a decline in legacy DSL customers.

Another factor in FiOS growth was its ongoing initiative to replace what it calls "chronic" copper customers that have more than three maintenance calls to its Fiber to the Home (FTTH) platform. Last year, Verizon converted 330,000 homes to fiber, surpassing its goal of 300,000 migrations within its FiOS markets. As of the end of the year, Verizon said it had "fewer than 1 million consumer customers served by copper in FiOS markets."

Another factor of the copper-to-fiber shift is that it's driving up consumer APRU. Copper-based voice customers converted to fiber continue to purchase multiple services, including higher speed broadband and TV.  

"If they're only voice, they are coming over to our FiOS Quantum offer," said Fran Shammo, CFO and EVP of Verizon, during the fourth quarter 2013 earnings call. "If they are coming over, they are buying up FiOS Quantum significantly, which is generating ARPUs of $15-$20 over and above what they were as a copper customer."

Shammo added that to accommodate customers who purchase a 50 Mbps tier and above, "we are working on a new router that's going to give better in-home performance with all the extra wireless devices that are going on."

Business services: In the enterprise space, strategic revenue grew 2.3 percent year-over-year to $2.14 billion due to strong sales of data center, cloud and security services. Strategic services now make up 59 percent of Verizon's global enterprise revenue.

However, overall business service revenues declined 5.2 percent to $3.6 billion due to slower enterprise and public sector spending. Likewise, CPE revenue declined 25 percent year-over-year.

"We continued to see pressure in revenue from the public sector, which declined at a double digit rate," Shammo said. "This decline included soft demand and product rationalization at the federal, state and local levels."

Shammo added that it is seeing similar softness in the private sector. "Many enterprises are focused on improving their cost structure, which puts pressure on our top line revenue," he said.

Wholesale: Similar to earlier quarters, wholesale revenue declined 7.8 percent to $1.63 billion due to ongoing declines in TDM-based service transport services.  

Shammo said that revenue pressure in the wholesale space "continues to be caused by decline in legacy transport services."

From an overall financial perspective, Verizon reported that total fourth quarter 2013 operating revenues were $31.1 billion, up 3.4 percent year-over-year, with 84 percent of revenues generated by Verizon Wireless, FiOS and strategic enterprise services.

For the full-year 2013, total operating revenues were $120.6 billion, up 4.1 percent, or $4.7 billion, compared with the same period a year ago.

Shares of Verizon were listed at $47.63, down 72 cents in morning trading on the NYSE.  

For more:
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Updated article on Jan. 21 with correct amount of FiOS ARPU.