Ho Hum! Another Blah Quarter for Fios

Alan Breznick
10/28/2019

With its focus squarely on 5G wireless, Verizon is not exactly boasting about its Fios wireline business these days. And it's easy to see why. Once the apple of Verizon's eye, Fios has been racking up lackluster quarter after lackluster quarter for several years now.

The latest quarter was certainly no exception to this rule. In its Q3 earnings release Friday, Verizon reported that Fios added a middling number of residential broadband subscribers, netting 30,000 new customers. That total came in short of Wall Street's consensus estimate and represents a sizable decline from 48,000 net adds in the year-earlier period. The gain was also not enough to offset a corresponding drop of 35,000 DSL subscribers, leaving Verizon with 5,000 fewer broadband subs overall.

As a result, Verizon closed out September with nearly 5.9 million Fios Internet customers and about 6.5 million total broadband subs as its DSL base continues to dwindle rapidly.

Like other legacy pay-TV providers, Verizon's Fios unit also continued to shed residential video customers at a steady clip, losing 67,000 subs to lower its grand total to 4.2 million. But at least that loss was pretty much in line with both last year's video sub loss (67,000) and Wall Street's consensus forecast.

Those numbers explain why Fios did not exactly stand out in a company earnings report that mainly drooled about the company's 5G prospects. In fact, Craig Moffett, principal analyst at MoffettNathanson, notes that Verizon's overall wireline operation showed weakness in nearly every financial metric and category, including retail, business and enterprise.

"Ugh," Moffett wrote in a note to investors on Friday. "It's hard to work up much enthusiasm for the conclusion that, as is seemingly the case every quarter, wireline results were worse than expected."

As noted in Light Reading's coverage of Verizon's second-quarter earnings in August, Fios does continue to chug right along. Despite the seemingly endless erosion of its video subscriber base, the Fios consumer unit boosted its total revenues by 1.7%, which the company credited "primarily due to the demand" for its broadband offerings.

But that increase was one of the few bright spots for Fios and the entire wireline unit in the company's summer earnings report. So it's no wonder that Verizon is pinning so much of its hopes on wireless in general, and 5G in particular, these days.

"The weakness in Wireline this quarter was so severe that it may deflect attention from Wireless," Moffett wrote. "But Wireless is still the core business, and the future of wireless is still 5G. So what happens in 5G is what matters."

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— Alan Breznick, Cable/Video Practice Leader, Light Reading

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