Verizon Fios Slows Growth Pace

As the US broadband market continues to expand, Verizon Fios is still picking up data subscribers at a steady clip. Just not as many as before.

Verizon Communications Inc. (NYSE: VZ) reported Tuesday morning that its fiber-fed Fios unit added 47,000 Internet subscribers in the fourth quarter, marking its sixth straight quarterly gain. The quarterly performance capped off a year that saw Fios notch nearly 200,000 new residential data subs, boosting its customer total to almost 5.9 million.

But the quarterly gain of 47,000 subscribers represented a decline from Fios's third-quarter addition of 66,000 data subs. It also represented a decline from the 68,000 data subs that it picked up in the fourth quarter of 2016. So the cup appears to be both half-full and half-empty for Verizon.

Notably, as in the past few quarters, the Fios Internet customer gains were not big enough to wipe out Verizon's continuing exodus of DSL customers. The company lost an estimated 66,000 subscribers in Q4, leading to an overall loss of 19,000 broadband subs as its legacy DSL subs keep turning to better, faster alternatives. With the latest losses, Verizon now has only 1.1 million DSL subs left and about 7 million broadband subs overall.

On the bright side for Verizon, its Fios Internet service is still making strides despite the continuing erosion of its companion Fios Video service. For the fourth straight quarter, Fios Video slumped, shedding 29,000 subscribers, as opposed to a gain of 21,000 in the prior-year period. As a result, Verizon closed out 2017 with just over 4.6 million video subs, down 75,000 subs for the year.

Thanks to the Fios Internet sub gains, Verizon said total Fios revenues climbed to nearly $3 billion in the fourth quarter, up 2.3% on a year-over-year basis. For the full year, Verizon reported nearly $11.7 billion in Fios revenues, up 4% from its 2016 total.

Overall, Verizon posted fourth-quarter net income of $18.8 billion on revenues of $34 billion -- up 5% year-on-year. For all of 2017, the company reported revenues of $126 billion. (See Verizon Capex to Stay Flat Despite Commercial 5G Launch in 2018.)

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