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Verizon: we'll nab share by revving FiOS data speeds

Tue, 01/21/2014 - 1:30pm
Brian Santo

Verizon posted fourth-quarter net income of $5 billion, attributed largely to the number of wireless subscribers connecting not only with smartphones but also with tablets. The numbers were also boosted to a lesser extent by modest growth in the company’s other two strategic businesses: FiOS and enterprise services.

Verizon reported126,000 FiOS Internet and 92,000 FiOS Video net additions, with continued increased sales penetration for both services, along with a 15.6 percent year-over-year increase in FiOS revenues. Revenue growth was attributed to price increases.

Verizon now claims 6.1 million FiOS Internet customers and 5.3 million FiOS TV subscribers. The number of FiOS broadband additions exceeded the number of DSL defections by 20,000. The company claims an overall total of 9 million broadband subscribers.

The company noted that 55 percent of FiOS Internet customers subscribe to a tier offering 50 Mbps service or higher. CFO Fran Shammo said Verizon expects to continue to compete for market share in FiOS markets, focusing on its Quantum broadband plans – its 50 Mbps ($60/month) and 75 Mbps ($70/month) tiers.

Shammo said Verizon will continue to increase its speeds. He said the impetus for consumers to move to higher-bandwidth plans – 50, 75, and 100 Mbps – will be associated with the use of more and more wireless devices being used in the home competing for resources. Machine to machine (M2M) connectivity will also come into play, he said.

Shammo said to accommodate that demand, the company is “working on a new router that’s going to give better in-home performance with all the extra wireless devices that are going on.” This device would be capable of delivering broadband rates in excess of 100 Mbps, he said.

In the company’s call with analysts, Shammo said the growth in FiOS customers was modest during the quarter because competitors started competing on price and Verizon didn’t want to match the offers.

“We didn’t believe that we wanted to chase some of those price points in the fourth quarter because we know from our customer experience that a lot of customers do not want us intruding in their houses during the holiday season,” Shammo said. His comments were taken from the transcript of Verizon’s call with analysts, provided by Seeking Alpha.

Furthermore, he explained, Verizon had been shooting for 300,000 total FiOS adds for the year, and it had already achieved that by Q3 (the total number of FiOS adds for the year ended up at 330,000).

Verizon also said it has migrated another 330,000 homes from copper to fiber. By year-end, Verizon said it had fewer than 1 million consumer customers served by copper in FiOS markets.

Separately, Verizon said it reached a deal to buy Intel Corp.'s cloud TV products and services business.

The largest U.S. cellphone carrier reported increases in both the number of connected devices and its wireless subscriber population. Its results reported Tuesday beat Wall Street predictions.

New York-based Verizon said overall service revenue rose 8 percent to $17.7 billion.

The company added 1.7 million net retail wireless connections during the quarter, excluding acquisitions and adjustments. Of that total, 1.6 million were connections that involved monthly service contracts.

As of Dec. 31, Verizon had a total of 102.8 million retail connections, marking a 5 percent increase over the same time a year ago. The 2013 total included 96.8 million connections with monthly contracts.

Francis Shammo, Verizon's executive vice president and CFO, said on a conference call with investors that the company got a big boost from new contracts for tablet service, which totaled 790,000 and marked the largest quarterly total since tablets were first introduced in 2010.

Meanwhile, Verizon's overall population of retail wireless subscribers increased 4.5 percent to 35.1 million, with each customer having an average of 2.8 connected devices.

The company's wireline division, which provides landlines along with the company's FIOS internet and TV services, also saw growth. Consumer revenues at that division rose 6 percent to $3.8 billion, as FIOS-related consumer revenue jumped 15 percent to nearly $2.8 billion.

Shammo also said on Tuesday's call that Verizon expects its $130 billion acquisition of Vodafone Group PLC's 45 percent stake in its wireless division to close on Feb. 21. Once that happens, Verizon will no longer have to share its wireless revenue with the British cellphone company.

For the quarter ended Dec. 31, Verizon's profit amounted to $1.76 per share. The company lost $4.23 billion, or $1.48 per share, in the year-ago period. Excluding one-time items, the company said it posted an adjusted profit of 66 cents per share.

Revenue rose 3 percent to $31.07 billion from $30.05 billion.

Analysts polled by FactSet expected a profit of 62 cents per share on $31.04 billion in revenue.

For the full year 2013, Verizon earned $11.5 billion, or $4.01 per share, compared with $875 million, or 31 cents per share, in 2012. Revenue rose to $120.55 billion from $115.85 billion.

-          The Associated Press contributed to this report.

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