Verizon’s Q2 earnings see FiOS TV slide, focus on 5G

Verizon's Q2 Earnings
Verizon has launched 5G in nine cities. It plans to be in 30 by year's end

Verizon’s Q2 earnings reinforced its softening focus on the pay-TV business and FiOS TV as the telco continued to ramp up its 5G mobile play. Verizon (NYSE: VZ) said the pay-TV service lost 52,000 subscribers in the second quarter, up 37% from its 38,000-subscriber decline a year ago and essentially flat from Q1’s loss of 53,000. It added 28,000 high-speed Internet subscribers in the quarter.

During Verizon’s Q2 earnings call with analysts, CEO Hans Vestberg reiterated Verizon’s strategy of offering YouTube TV, the streaming virtual pay-TV service, to its FiOS Internet, wireless and 5G Home customers, something it first announced in April.

“In this quarter we announced that we were going to work with YouTube TV when it comes to linear TV, both for FiOS optionality as well as for the wireless product,” Vestberg said.

YouTube TV carries more than 70 networks, including local affiliates, on-demand content and cloud DVR services. Verizon, after an aggressive launch of its FiOS TV service during the Ivan Seidenberg years, has seen its growth – along with the rest of the pay-TV industry – stunted.

5G buildout gathering steam

Verizon in Q2 upped its push to expand its fiber network – the backbone of its 5G play – by 40% to 1,400 route miles a month from its planed 1,000 miles and has expanded to 60+ markets outside its footprint.

“Ultimately if you’re going to do 5G you need fiber,” Vestberg said.

He pointed out that “Verizon made history this quarter by becoming the first carrier in the world to launch 5G mobility,” activating its 5G network in Chicago and Minneapolis is April, later adding Denver and Providence, RI. On Wednesday it lit up its 5G network in Atlanta, Detroit, Indianapolis and Washington, DC.

“We are focused on optimizing our next-generation networks and enhancing the customer experience while we head into the second half of the year with great momentum,” Vestberg said.

Verizon plans to have 5G live in 30 markets this year, planning to add Boston, Charlotte, Cincinnati, Cleveland, Columbus, Dallas, Des Moines, Houston, Kansas City, Little Rock, Memphis, Phoenix, San Diego, and Salt Lake City.

Verizon Q2 earnings by the numbers

  • EPS: $1.23 adjusted, vs. $1.20 by the Street;
  • Revenue: $32.1 billion vs. $32.41 billion expected;
  • Wireless: 451,000 retail postpaid net additions, including 420,000 postpaid smartphone and 245,000 phone net additions; and,
  • FiOS subscriptions: 53,000 FiOS TV subscriber losses; 28,000 FiOS Internet adds.

The bottom line

Verizon, along with AT&T were late entries to delivering video entertainment.

While AT&T’s acquisition of satellite pay-TV operator DirecTV and content powerhouse Time Warner has positioned it to be a major player in the space, Verizon has opted to refocus its energies on its network.

A failed experiment with mobile video service go90 has been a rock in the shoe since it closed down the video app in July 2018 and ate the estimated $1.2 billion it spent acquiring Intel’s OnCue team and Vessel, along with content, other technology and operating costs.

So, it’s not surprising the company has declared all in on its network and 5G play.

As CFO Matt Ellis said about its wireless business and the network it’s operating: “In the past couple of years we’ve seen the industry bundle in video (with wireless services). When you have the best network you don’t need to bundle things in there the same way.”

Maybe you just need to offer another company’s video service instead.

Stay tuned.

Jim O’Neill is Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn