Verizon’s wireline division will see revenue struggles in the third quarter as cable competitors like Charter and Comcast ramp up their broadband and video pricing promotions to attract new customers.
Scotia Capital said in a research note that it expects Verizon will report declines in TV and broadband data services during its third-quarter call.
“We forecast organic wireline revenue to continue to decline in Q3 as the company faces substantial promotional activity from its cable competitors,” Scotia Capital said in a research note. “As a result, we expect the company will see net losses in both TV and Internet as well as declining wireline ARPU.”
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Comcast, for one, has been aggressively expanding the availability of its 1 Gbps offerings via its existing DOCSIS 3.1 network infrastructure in various key markets. Thus far, the cable MSO has launched DOCSIS 3.1 service in Atlanta, Detroit and Miami, as well as in other markets in Utah, Florida, Tennessee and Alabama, enabling it to rapidly gain more broadband market share.
Other regional cable operators such as Atlantic Broadband, Mediacom and RCN have also been rolling out DOCSIS 3.1-enabled services across their respective territories.
Scotia added that Verizon “is doing a good job of cutting SG&A, which should help drive positive EBITDA growth for Q3.”
The telco will officially release its third-quarter earnings on Thursday morning.
A likely focus point will be on Verizon’s broadband results.
Telcos overall have been losing the broadband battle to cable over the past several quarters. The top seven U.S. cable companies signed up 461,997 residential high-speed internet users in the second quarter and now control 63.6% of the U.S. residential broadband market.
"Cable companies added about 3.1 million broadband subscribers over the past year, while Telcos had net losses of about 550,000 broadband subscribers," said Bruce Leichtman, president and principal analyst for Leichtman Research Group, in a statement.
One slight glimmer of broadband hope for Verizon was in its standalone 1 Gbps FTTH offering during the second quarter. As it rolled out the 1 Gbps offering, Verizon added 49,000 new Fios subscribers, helping to offset ongoing DSL subscriber losses to cable competitors.