Verizon, AT&T celebrate subscriber growth, new features rolled out in Q2

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Richard Lawler
July 23rd, 2011
Verizon, AT&T celebrate subscriber growth, new features rolled out in Q2
When earnings for AT&T and Verizon came out we mostly focused on their cellphone related business, but both are also major players in the pay-TV space these days. Verizon's FiOS TV segment (minus the parts sacrificed to Frontier) added 184,000 customers in the last quarter, bringing it to a total of 3.4 million subscribers and crossing over 30 percent of potential penetration. AT&T's U-verse TV added 202,000 subscribers and reached 3.4 million in total, while also rolling out a few new features. We'll have to wait until next week to get most of the other pay-TV numbers, but who's betting there will be a new round of "cable cutting" predictions to go around?
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AT&T Q2 2011 Recap: AT&T U-verse Growth and Highlights
AT&T U-verse® continues to bring new and better ways for customers to interact and watch their TV content. During the second quarter of 2011, we introduced new Total Home DVR features that allow U-verse customers to pause and rewind live TV on any TV receiver in the home – even when the DVR is connected to another TV. We launched a new TV app that gives customers convenient access to self-support information and tools for their U-verse TV service directly from their TV screen. And we launched Multiviews for popular sporting events. How are customers responding? AT&T U-verse is the fastest growing TV provider in the country, with more TV subscribers added than any of the major TV providers reported from the first quarter of 2009 through the first quarter of 2011. Below is a second-quarter recap on our AT&T U-verse growth and highlights.

SERVICE GROWTH: Advanced TV Driving Customer Adoption
· 3.4 million U-verse TV customers.

· 2.0 million U-verse Voice connections.

· 4.1 million U-verse High Speed Internet customers.

· More than 90 percent of U-verse TV customers bundle High Speed Internet.

· More than 75 percent of U-verse TV customers have a triple- or quad-play.

· AT&T U-verse bundles available in 136 markets (MSAs) across 22 states.

· More than 29 million living units passed by our advanced fiber network.

· AT&T U-verse is now approximately an annual $6.5 billion run-rate business.

· ARPU for U-verse triple-play customers is more than $170 a month.

SERVICE EVOLUTION: More Flexibility, More Interactive Apps
· Launched exclusive Chicago Cubs Multiview, which lets U100 and above customers view up to four different camera angles of Chicago Cubs home games at one time – marking the first time AT&T has made multi-camera angle functionality available to U-verse TV customers nationwide.

· Offers more HD channels than the competition in every market.

· Added new AT&T U-verse TV Total Home DVR features that allow users to pause and rewind live TV on any U-verse receiver in the home.

· Launched AT&T Troubleshoot and Resolve app that gives you access to self-support information and tools on your U-verse TV screen.

· Offered exclusive free preview of Conan O'Brien's documentary, Conan O'Brien Can't Stop, and additional content on U-verse Movies and across screens.

· Launched the French Open Multiview, which lets you watch multiple matches on up to four courts at once.

· Launched an exclusive AT&T U-verse offer that provides significant savings for existing AT&T wireless customers that sign up for U-verse services, providing more customers with the benefits of quad-play bundle subscriptions.

Improved Revenue Trends in Wireline

Verizon's Wireline segment continued to expand margins, supported by improved revenue trends. In the second quarter of 2011:

Wireline Financial Highlights

Segment EBITDA margin (non-GAAP) was 23.8 percent, compared with 22.4 percent in second-quarter 2010. This was Wireline's fifth consecutive quarter of sequential EBITDA margin expansion.

Second-quarter 2011 operating revenues were $10.2 billion, a decline of 0.3 percent compared with second-quarter 2010. This is an improvement from a decline of 2.2 percent comparing first-quarter 2011 to first-quarter 2010. Verizon acquired cloud and managed IT infrastructure leader Terremark Worldwide in April, and the inclusion of Terremark results added $98 million in revenue, representing 100 basis points of wireline revenue growth, in second-quarter 2011.

Revenues for Verizon's FiOS fiber-optic services to consumer retail customers generated approximately 57 percent of consumer wireline revenues in second-quarter 2011, compared with approximately 48 percent in second-quarter 2010.

Consumer revenues grew 1.3 percent compared with second-quarter 2010. Consumer ARPU for wireline services was $92.44 in second-quarter 2011, up 9.4 percent compared with second-quarter 2010. ARPU for FiOS customers continues to be more than $146.

Global enterprise revenues totaled $4.0 billion in the quarter, up 3.6 percent compared with second-quarter 2010. Sales of strategic services - including Terremark cloud services, security and IT solutions, and strategic networking - increased 17.8 percent compared with second-quarter 2010 and now represent approximately 48 percent of global enterprise revenues.

Wireline Operational Highlights

Verizon added 189,000 net new FiOS Internet connections and 184,000 net new FiOS TV connections in second-quarter 2011. Verizon had a total of 4.5 million FiOS Internet and 3.8 million FiOS TV connections at the end of the quarter.

FiOS penetration (subscribers as a percentage of potential subscribers) is now 30 percent or more for both services. FiOS Internet penetration was 34 percent at the end of second- quarter 2011, compared with 30 percent at the end of second-quarter 2010. In the same periods, FiOS TV penetration was 30 percent, compared with 26 percent, respectively. The FiOS network passed 16.1 million premises at mid-year 2011.

Broadband connections totaled 8.6 million at the end of second-quarter 2011, a 3.3 percent year-over-year increase. FiOS Internet connections more than offset a decrease in DSL-based HSI connections, resulting in a net increase of 62,000 broadband connections from first-quarter 2011. Total voice connections, which measures FiOS Digital Voice connections in addition to traditional switched access lines, declined 7.9 percent to 25.0 million - the smallest year-over-year decline since second-quarter 2007.

During the quarter Verizon continued to execute its global cloud strategy, rolling out an expanded portfolio of secure IT solutions and an operational model for its Terremark subsidiary. Verizon also continued to deploy integrated IT and communications solutions for multinational enterprise, medium-sized and government customers. These solutions included expansion of the company's managed mobility services for tablets, mobile access to cloud-based SAP applications and enhanced security management programs for health care providers. Verizon also completed new agreements with a range of multinational corporations, including Constellation Energy, Epsilon, Masco Corp. and PHH Corp.

Verizon expanded its global network infrastructure during the quarter as it continued to broaden its scope and capabilities. The company installed 63 additional Private IP edge routers for a total of 915 edge routers in 245 sites throughout 63 countries, activated more than 1,500 kilometers (932 miles) of ultra-long-haul network across the southern part of the United Kingdom, and completed a joint fiber build in Singapore, which almost doubles the coverage of the Singapore fiber-optic network. Verizon continued to demonstrate leadership in scaling the global IP network and kicked off the expansion of 100G IP backbone capabilities in the U.S. to nine routes.

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