With Q1 2011 earnings season now behind us, we thought it would be a good time to take a look back at how the top 10 wireline telcos did.
Wireline telcos, even those that have wireless assets, are all trying to find ways to find new profits on both the consumer side (broadband and video) and business and wholesale (managed services, cloud and wireless backhaul).
In other words, wireline operators banked on what could be called the three fundamental Bs of broadband, business and backhaul.
You can take a look at our Q1 earnings page and the accompanying Q1 metrics report.
While the trends will vary from quarter to quarter, there were four recurring trends that the wireline operators had in common in Q1 2011:
- Bundling Broadband: Whether it's ADSL2+, VDSL2 or Fiber to the Premises (FTTP), broadband continued to be a lynchpin revenue generator for all of the top three ILECs and Tier 2 ILECs as well. Dominating the broadband headlines are AT&T (NYSE: T) and Verizon (NYSE: VZ). During the first quarter, Verizon added 207,000 net FiOS Internet subscribers, bringing it to 4.3 million total FiOS Internet connections and 3.7 million total FiOS TV connections, while AT&T added 175,000 new broadband subscribers and 218,000 U-verse subscribers, respectively. However, ongoing declines in traditional DSL services caused AT&T to fall short of the 195,000 new broadband subscriber goal analysts had for Q1. New kid on the Tier 1 telco block CenturyLink (NYSE: CTL) and its acquisition of Qwest brought in a combined total of 98,000 new broadband subscribers. Outside of the Tier 1s, Windstream (Nasdaq: WIN) attracted more broadband subscribers delivering average of 4 Mbps speeds in addition to expanding its VDSL2 reach to deliver 12 and 20 Mbps in select markets. On a smaller scale, Sacramento-based SureWest (Nasdaq: SURW) continued to ramp up its ADSL2+ and Fiber to the Premises (FTTP) reach with 50 and even 100 Mbps services.
- Video Services: While video continues to be cable's loss, it remains wireline telco's gain in Q1. Leading the video charge in Q1 were AT&T and Verizon, which added 192,000 FiOS TV and 218,000 U-verse video subscribers. And while Frontier wants to get out of the telco TV business, CenturyLink and Windstream continue to make progress with video through its satellite resale business and its own Prism IPTV product. The bigger question for CenturyLink will be when and if they will deliver IPTV over Qwest's existing Fiber to the Node (FTTN) network. Windstream, while not outlining an IPTV play, continues to attract customers with its triple play video bundle with its resold satellite service with plans to launch an over the top (OTT) video service later this year. Also of note is SureWest, which added 4,600 new IPTV subscribers over its copper and fiber plant.
- Landline Loss: Losing traditional telephone voice lines is, and will continue to be, an ongoing reality that every wireline telco is going to face as more subscribers either ditch their black phone for a cell phone or defect to a lower-priced VoIP alternative like Vonage or opt for a cable triple play bundle. Despite these trends, many of the Tier 1 and Tier 2 ILECs were able to stem some of the landline bleeding in Q1. AT&T actually reported that overall wireline revenues rose $5.3 billion, while Verizon reported that its 8.2 percent decline in wireline voice lines was the lowest loss it has seen since 2008. Windstream, meanwhile, reported that it saw its lowest landline losses since it's been a public company in 2006 with a total of 3.3 million access lines at the end of Q1.
- Business/Wholesale Services: Driven by an increase in cloud, Ethernet IP VPN revenues, AT&T business IP business revenues, however, grew 8.5 percent, while Verizon's business revenue rose 12.8 percent to $3.8 billion. At the same time, CenturyLink, TDS Telecom (NYSE: TDS) and Windstream continued to ripen their business and wholesale offerings through aggressive network buildout plans and targeted acquisitions of cloud service companies. Another service provider worth mentioning on the wholesale front is FairPoint Communications. Fresh out of bankruptcy protection, the service provider announced plans to expand Ethernet and fiber capabilities to an existing 1,600 cell sites in its New England region.
Now that we have put the first quarter to bed, it will be interesting to see if the top 10 ILECs will be able to maintain their momentum in Q2 2011 and beyond.--Sean
P.S. FierceTelecom will not publish on Monday, May 30 in observation of the Memorial Day Holiday. We'll be back bright and early on Tuesday morning delivering to your inbox the latest news about the wireline side of the telecom industry.