Verizon meets earnings expectations, says new TV plans are OK
Verizon plans to continue offering its new Custom TV subscriptions, the company said during its first-quarter earnings call Tuesday.
The telecom giant announced the lower-priced monthly Custom TV subscription with fewer channels last week. But it caught the ire of ESPN, which said that the new offering violated current contracts.
"We believe that we are allowed to offer these packages under our existing contracts," said Verizon executive vice president and chief financial officer Fran Shammo during a conference call with analysts Tuesday after the company announced its first-quarter earnings.
Shares dropped slightly, about 1% in early trading Tuesday, to $48.87. Verizon (VZ) reported earnings per share of $1.02, beating estimates of 95 cents. Revenue of $32 billion rose 3.8%, from last year, falling just short of expectations of $32.27 billion.
The mixed results suggest that Verizon is trying to be smart about the wireless customers it goes after, said Dave Heger, communications analyst for investment firm Edward Jones. "The company kind of pulled back to some degree on promotional activity and on trying to bring in every wireless subscriber that they could and as a result that brought down their costs in the quarter and helped wireless profitability quite a bit," he said.
Wireless revenues rose 7% to $22.3 billion, with 565,000 net new subscribers added. That brings Verizon's total wireless retail subscribers to 108.6 million.
Verizon FiOS additions helped drive wireless revenue up 4% to $4 billion, with total FiOS revenues accounting for $3.4 billion, up 10%. Verizon added 133,000 new FiOS Internet subscribers and 90,000 FiOS video subscribers.
As for the new Custom TV package, Shammo said the company is simply responding to what consumers want. "It's all about consumer choice," he said. "If you look at the TV bundles today most people on average watch only 17 channels. So this is a way to give consumers what they want."
Custom TV prices start at $55 for TV-only packages ($74.99 with FiOS Internet and phone). Customers get a base package of more than 35 channels including CNN, HGTV, AMC and Food Network, plus they choose two of seven additional channel packages. Those packages include Sports (ESPN, Fox Sports).
With new services such as Sling TV and PlayStation Vue arriving to court potential pay-TV cord cutters, "Verizon is pushing the envelope ... with a competitive offering of (their) own," Heger said. "They are being proactive and perhaps (will) figure out the legal details afterwards."
Also in the works: a mobile and Net TV service, expected to be unveiled this summer, and Verizon Vehicle, a direct-to-consumer aftermarket roadside assistance service.
Follow Mike Snider on Twitter: @MikeSnider