Verizon Loses 13,000 FiOS Pay TV Subs in First Quarter

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Verizon CEO Lowell McAdam

The telecom giant, which is led by CEO Lowell McAdam and is expected to close its acquisition of Yahoo later this quarter, reported only its second-ever pay TV user drop.

Telecom giant Verizon on Thursday reported that it lost 13,000 net pay TV subscribers for its FiOS video service in the first quarter, compared with the 36,000 net additions in the year-ago period and with 21,000 in the fourth quarter.

It is the second-ever FiOS pay TV subscriber loss posted by the company in any quarter since its launch in 2006. In last year's second quarter, it had lost 41,000 TV subscribers. "This is the first time they have ever lost video subscribers in what is typically a seasonally strong first quarter," said MoffettNathanson analyst Craig Moffett.

Verizon ended the quarter with a total of 4.7 million subscribers to its FiOS video service, which competes with cable and satellite TV companies.

Verizon CFO Matthew Ellis on an earnings conference call cited weaker demand for traditional pay TV services, an increase in over-the-top offerings, mobile video consumption and "competitive promotional offers, particularly in the New York market" as key drivers of the FiOS TV subscriber loss.

Verizon is expected to close its acquisition of Yahoo later this quarter. The two companies earlier this year revised terms for the telecom giant's acquisition of the core business of the internet company after hacks of Yahoo email accounts. The final price tag will be $350 million lower than the original $4.83 billion price tag, or around $4.48 billion.

Verizon, after previously acquiring AOL and Millennial Media and last year launching millennials-focused mobile video service Go90, has said millennials remain a core focus for the company. Verizon also previously acquired a stake in AwesomenessTV and partnered with Hearst to jointly acquire male-focused media company Complex. 

The company has also touted the demand for its Custom TV service, which offers "skinny" pay TV bundles.

Verizon also reported Thursday that it added 35,000 net new FiOS broadband connections in the first quarter to end it with 5.7 million.

Verizon has so far stayed away from big entertainment or content acquisitions similar to rival AT&T's planned $85.4 billion takeover of Time Warner. But Verizon chairman and CEO Lowell McAdam earlier this week told Bloomberg News that he was open to talks about possible mergers or other deals with such industry giants as Comcast and Walt Disney.

Verizon's first-quarter earnings and revenue missed Wall Street estimates. Revenue dropped 7.3 percent, or 4.5 percent when excluding deals, to $29.8 billion, while earnings fell 19.8 percent to $3.6 billion.