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| AT&T & Verizon: Worst Broadband Quarter Ever |
| Thursday, 22 July 2010 10:25 |
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AT&T lost 92K broadband customers, to 15,952,000, the first time T fell since the beginning of broadband. Verizon added 28K, with 196K FiOS adds and 168K DSL losses. Jessica Reif-Cohen of Merrill thinks cable has won and much of the street agrees. Cable is doing better in broadband but not particularly well this quarter. Rogers in Canada added only 7K and Comcast 118K, with the others still to report. While cable is pulling ahead, I believe telcos with $40B/year in free cash flow could fight if the FCC lights their fire. T has brought back $14.95 "introductory" pricing (DSLR) but the regular prices still begin at 1/3rd higher than they previously charged.
V &T are making more money because wireless data is expanding, they are getting away with price rises, and they are firing another 20,000 or so. Verizon took a $2B writeoff to peaceably get rid of 10,000 mostly union workers, far more generous severance than Randall at AT&T tries to pay. The stock went up enough in one day to cover the full writeoff.
Wireline margins went up, making D.C. look very foolish stuffing $billions a year in giveaways to V & T in the new USF bill. These are two of the most profitable companies in the world, with $20B cashflows. They don't need new subsidies with a fig leaf proclaiming the money is going to broadband deployment. Maybe some people will start reading the bill and discover it puts a $5-10B annual tax on broadband and mostly gives the money to the big telcos' shareholders. Less than 20%, and probably less than 10%, will actually go to expanding broadband.
As Ivan Seidenberg fades into the sunset, everyone at Verizon is focusing on the next quarter, not the longer term results. CFO John Killian is making his play with the capex cuts and other ways to improve cashflow. Lowell McAdam, presumed from the outside to be heir apparent, is riding phenomenal results at Verizon Wireless. Don't trust outside speculation on any of this. Ivan himself got the job at the last minute over the objections of former CEO Ray Smith, who preferred another candidate according to a reliable source.
With DSL winning in most of the world, it's not clear cable has a definitive advantage.I can explain the current dismal telco results as primarily the price increases they have been pushing through. AT&T charges $160 for the typical U-Verse triple play and Verizon recently hiked prices. 10-50 megabit cable has a huge advantage over 2 or 5 megabit DSL, but the majority of AT&T is now 10-15 meg U-Verse and the majority of Verizon 50-200 meg FiOS. Cablevision most quarters beats Verizon FiOS, a better system, so the telco problems are not just the technology.
Verizon has cut $B from wireline capex (FiOS) for the first six months while increasing wireless. For the year, that's $2B down, although Verizon continues to invest substantially more than AT&T or other U.S. telcos. The cuts in Verizon + AT&T's broadband spending are about the same total as the entire U.S. broadband stimulus.The cuts are also enough, based on the broadband plan data, to bring DSL to 80% of the unserved in V & T's 70% of the U.S. If V & T simply restored the cuts, that would have more effect on actual broadband deployment than three years of the proposed broadband tax.
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| Last Updated on Monday, 02 August 2010 12:36 |