As most commentators disinterested in IPTV focused in this week’s results on how AT&T has almost caught up with the number of Verizon cellular customers, it’s the progress at the IPTV system U-Verse and its broadband numbers which impressed us.
U-Verse TV customers jumped 236,000 in the quarter to 2.7 million, but AT&T also had a 148,000 gain in wireline broadband subscribers, one of AT&T’s best gains for some years. This helped it grab a 30% rise in consumer IP data revenues as it produced the first year-over-year growth in wireline consumer revenues in more than two years, up 0.2% to $5.3 billion.
In broadband, more than 75% of AT&T U-verse TV subscribers have a triple- or quad-play options and the ARPU (average revenue per user) for U-verse triple-play customers has reached $160 a month, which would bring in U-Verse revenues on an annualized basis at around $5.2 billion, as big chunk of its total wireline revenues. In the third quarter, AT&T U-verse revenues were only $1.1 billion, which would annualize at $4.4 billion, but of course it’s growing so fast that many customers have only paid one month or less during the quarter, because they were new. But this still made revenues 84.5% higher than a year ago.
AT&T U-verse now reaches more than 26 million living units, about 8 million more than it said it would reach back when it began rolling out the service in 2004. So far it has penetrated 14.1% of these units, but if you look only at markets where it has been for a full 30 months, overall penetration is more than 22%. Clearly AT&T reckons it will comfortably take 22% in all these markets eventually, around 5.7 million homes, more than doubling its TV market share and revenues.
AT&T’s total video subscribers, which combine the company’s U-verse and bundled satellite customers, reached 4.7 million at the end of the quarter, representing 18.8% of households served. This suggests that the satellite customers are withering on the vine, and that AT&T is no longer increasing this number.
AT&T said that U-verse penetration drove a 30% rise in consumer IP revenues in which it includes broadband, U-verse TV and U-verse Voice. IP revenues now represent 42.6% of AT&T’s wireline consumer revenues, up from 32.8% a year ago.
AT&T consumer connections still fell due to expected declines in traditional voice access lines. AT&T U-verse Voice connections increased by 166,000 in the quarter and 759,000 over the past four quarters. Total consumer revenue connections at the end of the third quarter were 43.7 million, compared with 45.7 million at the end of the third quarter of 2009 and 44.3 million at the end of the second quarter of 2010.
We have been pointing at this type of turning point for over three years and always said that when the fixed voice line losses balanced the TV customer acquisitions then the pressure would go back on the cablecos who have been living off VoIP and broadband desertions for some time.
Over at Verizon we see much the same type of pattern. It had 204,000 new FiOS TV customers, and is now regularly scoring less than AT&T, and added a total of 226,000 net FiOS Internet additions. It still has more FiOS TV customers than AT&T has U-Verse TV, at 3.3 million and it will still take a while to catch up ‘ at this rate about 10 quarters or two and a half years. Verizon also has 3.9 million FiOS Internet customers. FiOS revenues now make up around 50% of total consumer revenues in Verizon Wireline.
The constant yardstick of comparison with AT&T, has done Verizon some good, and the 226,000 net new FiOS customers was the largest net quarterly increase in more than a year. FiOS is only available for 12.5 million homes, far less than AT&T, but then it’s penetration, and probably in the long term, its resilience against churn, is better than the AT&T numbers. FiOS Internet penetration is 31% compared to 28.7% at the end of third-quarter 2009. FiOS TV penetration was 27.2% which compares with 25.1% at the end of third-quarter 2009.
Verizon points out that for FiOS penetration rates have been consistently growing and are more than 35% in older markets, with a few markets in excess of 40%. Total wireline broadband and video revenues were $1.8 billion in the quarter.
Consumer ARPU for all wireline services was $86.55 for Verizon, but for just FiOS this was around $146, a little behind the AT&T U-Verse number.
Verizon overall broadband connections reached 8.3 million up only 2.7% year-over-year, up just 61,000 from the second quarter. For Verizon this is the increase in FiOS Internet connections offsetting the fall in traditional DSL connections.
As of the end of third-quarter 2010, the FiOS network passed 15.4 million premises, 60% of Verizon’s domestic wireline footprint
AT&T had revenues of $36.1 billion in the quarter, up 2.8% and reached 92.8 million cellular subscribers, with a rise of 2.6 million cellular subs in the quarter, while Verizon had revenues of $26.5 billion down 2.9% and added just 997,000 cellular customers to bring it to 93.2 million.
Cellular success continues to dictate how much growing these two giants do, but stemming the flow of red ink at the wireline end of the business continues to dictate how much money they make, and AT&T clearly seems to be in the better shape short term.