- Verizon CEO Hans Vestberg was put on the defense this week by analysts who asked whether the company was at a disadvantage without a stronger fixed/mobile converged play
- Vestberg said Verizon will deliver what the customer wants
- But both AT&T and T-Mobile are already way further ahead on convergence
Investors on Verizon’s second quarter 2024 earnings call this week challenged company executives whether it had a big enough fiber footprint to compete in the future. The investors were disappointed that FiOS, Verizon’s main fiber offering, saw 28,000 FiOS net additions during the quarter, down significantly from the 51,000 net adds in the same quarter a year ago.
Verizon CFO Tony Skiadas seemed to indicate that the end of the Affordable Connectivity Program (ACP) was part of the problem. “We saw some pressure in Fios in terms of gross add opportunity,” said Skiadas when talking about ACP.
During the Q&A session on the earnings call, Verizon CEO Hans Vestberg was specifically asked about the health of the broadband market.
Vestberg said, “So we see it healthy. Of course, Fios is by far the best fiber product in the market.”
But is it?
One analyst asked Vestburg to what extent he thought that fixed/mobile convergence will be more of the norm in the U.S and whether Verizon would be at a disadvantage with its smaller wireline footprint.
Vestberg said, “We see some uptick” on the fixed mobile convergence. “We have all these economics on wireless and on broadband. And we will see that if our customer wants to have a converged product, we will do that."
This is in contrast to AT&T which has been blowing its horn about fixed and mobile convergence for a few years now. In fact on its earnings call this week AT&T CEO John Stankey kicked off the call saying the Dallas-based company was “on a clear path to becoming the leading provider of converged 5G and fiber services.”
And recently, T-Mobile has even jumped into the fiber game with both feet.
But Verizon has not been pushing the convergence message. When you think of Verizon and fiber, you tend to think of Fios, which is its fiber-based brand with limited coverage in the Northeast U.S. that bundles connectivity, voice and video. Rather than dramatically expanding its Fios footprint, though, Verizon has mainly been deploying fiber in recent years to provide transport connectivity for its 5G cell towers.
Analyst Walter Piecyk with LightShed Partners said, “I guess the big question is, at least for me, how important is it in the long-term for you to have a vertical solution for customers, meaning that the consumer can buy their home broadband and their wireless services from you, and if you're not doing that obviously, outside of the FiOS markets, is that a risk if others put together that vertical solution?”
Vestberg said, “We are well positioned in that area. And again, if the market [goes to] convergence between mobility and broadband, we will be there to serve our customers either with Fios and fixed wireless access. And right now, that's working really good for us.”
Circling back to the lower-than-expected FiOS adds during the recent quarter, the analysts at New Street Research said there won’t be a clear picture of the state of the broadband market until ACP is completely unwound toward the end of this year.
“Investors are wrestling with whether the current level of growth is the new normal, or whether growth will recover,” wrote New Street. “We suspect the market is burning through the accelerated penetration gains of the early pandemic period and growth will recover.”
Meanwhile, fixed wireless access continues to be a bright spot for Verizon, which added 378,000 subscribers in the quarter, keeping it on track for its goal of 4 to 5 million FWA subs. At the end of second-quarter 2024, the company had a base of more than 3.8 million FWA subscribers and 11.5 million total broadband subscribers.