U-verse Overtakes FiOS

Maintaining its strong momentum in the pay-TV business, AT&T Inc. has surpassed rival telco Verizon Communications on the video front and is picking up steam on the biggest US cable operators.

In its third-quarter earnings report last week, AT&T Inc. (NYSE: T) said it signed up an impressive 265,000 new U-verse TV customers in the latest three-month period, up from 198,000 in the year-ago period and its second-best quarterly gain ever. With that increase, it reached nearly 5.3 million U-verse TV customers, putting it a notch ahead of Verizon Communications Inc. (NYSE: VZ)'s nearly 5.2 million FiOS TV customers.

Thanks to these latest gains, both AT&T and Verizon easily have more video subscribers than all but the two biggest US MSOs, Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Time Warner Cable Inc. (NYSE: TWC). Both telcos also continue to pick up video customers at a much faster clip than cable operators, who, while still dominating the US pay-TV market with nearly 60 million video subscribers, have been struggling to stem the steady erosion of their core video customers over the last few years.

On the broadband front, AT&T also notched one of its strongest gains yet with its U-verse Internet service, even though the telco still offers much lower maximum data speeds than Verizon's FiOS Internet service or most major MSOs. The company reported a whopping net increase of 655,000 U-verse Internet subscribers in the third quarter as it continued to convert as many DSL customers as possible to the new hybrid fiber-copper platform.

Overall, though, AT&T still shed 26,000 wireline broadband subscribers as some of its DSL customers went elsewhere. So U-verse is largely just stemming AT&T heavy broadband losses, not increasing its high-speed data customer base.

Thanks to its latest gains, AT&T now boasts 9.7 million U-verse Internet subscribers, up 37 percent from a year earlier and well above Verizon's total of 5.9 million FiOS Internet subs. Factoring in its rapidly dwindling DSL base, AT&T has 14.7 million high-speed residential data customers, more than all US broadband players except Comcast. U-verse accounts for 59 percent of that total, up from 43 percent a year ago.

Overall, AT&T reported that 10 million of its customers now subscribe to either one or both of its main U-verse products. More than 90 percent of its new U-verse TV customers are signing up for both services as the telco aggressively bundles the two together. In addition, the company said, about 70 percent of U-verse TV subscribers are taking three or more of its consumer products.

Due to these gains, AT&T reported that total U-verse revenues climbed to $3.1 billion in the third quarter, up 28 percent from a year ago, as U-verse enjoyed its first $1 billion month. U-verse's residential products now account for 54 percent of the company's consumer wireline revenue, up from 43 percent a year earlier.

U-verse is also starting to make an impact on the commercial services front. AT&T said it added a record 97,000 business U-verse Internet subscribers in the third quarter as more customers signed up for such advanced IP services as VPN, Ethernet, and web hosting. However, the company's total revenues from business services slipped 2.6 percent to $8.8 billion over the summer, as its legacy products continued to sag.

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

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Sarah Thomas 10/28/2013 | 3:19:28 PM
Re: Real growth? What are the three or more consumer products that its customers are buying on the U-Verse front? I know broadband and TV are its primary services, but does that mean premium channels or Digital Life services?
DOShea 10/28/2013 | 2:30:46 PM
Real growth? As you point out, the impressive-sounding U-verse Internet growth is more like a trade-off between U-verse and DSL. Even on the business side, the Internet growth is interesting to see, but it seems like competition is taking a bite out of its other products.
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