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Verizon profits, but landline subscribers fall

By Tom Zucco, Times Staff Writer
In print: Tuesday, July 29, 2008

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Strong wireless sales helped Verizon Communications post better-than-expected second-quarter earnings Monday, but customers disconnected their landline home phone service more quickly than they picked up FiOS, Verizon's high-speed Internet and video service.

That move sent the stock of the nation's second-largest phone company to an almost two-year low.

During the second quarter, Verizon added 176,000 FiOS television users, bringing the total number of customers to 1.4-million, and added 187,000 FiOS Internet users, bringing the total customer count to nearly 2-million by the end of the quarter.

But Verizon lost 11.4 percent of its residential landlines in the past year, continuing the erosion of the telecommunication company's legacy business. Industry analyst Bruce Leichtman, head of the Leichtman Research Group, said the loss of about 1-million phone lines has prompted Verizon to change its strategy.

"The prime motivator for that company is wireless," Leichtman said. "What we're seeing is a change of gears to focus on the higher end, more valuable subscribers."

Bright House Networks — a Verizon competitor in the Tampa Bay market — is doing the same thing, Leichtman said, focusing on the subscriber who gets cable, phone and Internet. "And they've been very successful at driving that strategy," he said.

Michelle Robinson, president in Tampa of Verizon's southeast region, said her company has invested more than $1-billion in Tampa Bay. "And we're about halfway through," she said. "Our core business still is the traditional phone service."

Robinson acknowledged a loss in landlines, but she said any decline in landline revenue was offset by the growth in the FiOS service.

Earlier this month, Verizon put the number of its landline customers in the area at about 800,000. Two days later, Bright House said its phone customers grew more than 50 percent in the past year, surpassing 600,000 subscribers.

Bright House spokesman Joe Durkin said his company sees customers focused on buying high-speed Internet and digital home phone services.