Some things are irretrievably boring. Any Kevin Costner movie in the last two decades; most Super Bowls and lately even the commercials; and earnings calls are all things guaranteed to cure insomnia. Sadly, while you can avoid Kevin Costner movies like presidential primary debates and watch "Bewitched" reruns during the Super Bowl, if you need to know what’s happening in the tight-lipped telecommunications industry, you must listen to earnings calls.
There, between the ARPUs and EBITDAs and just before the free cash flow you’ll catch a glimmer of what service providers think will happen if things go according to plan in a world of non-economic slumps and vendors who deliver.
Recently, AT&T, coming off what company financial folks called "an outstanding wireless quarter," predicted that its U-Verse product (yes, that much-maligned, cable-mocked TV service) would have an installed base of more than a million by the end of 2008 and pass 30 million homes by 2010. On the other side of the country, Verizon was similarly impressed with its FiOS business, which already hit a million. Even more so, Verizon, the narrowband guys, are excited about broadband for wireless and wireless businesses.
"Our ARPU has been driven in most part by growth in data revenues (in wireless), and our retail ARPU grew 44 percent in 2007," said Dennis Stringl, president-COO of Verizon Communications, speaking that peculiar lingo money people like.
Not to be outdone, Doreen Tobin, Verizon’s EVP-CFO, added more money-geek talk by noting: "On the wireline margin, we are still confident that we will be EBITDA positive in ’08. We have one or two states that are EBITDA positive right now."
If I were EBITDA positive, I’d have my doctor shoot me up with penicillin. Things looking up When these guys finally start talking English, they reveal some interesting tidbits about the way their business is going and the way they expect it to go. Since they’re putting forth forward-looking statements, as they like to say, their projections are as cautious as could be expected of people who prefer Brooks Bros. pinstripes to prison stripes.
So when Stringl says, "we’re more successful at retaining customers where we have FiOS TV. As we expand the availability of FiOS, it should help our retention," it should send a shiver down the spines of cable guys just getting into the voice business sans a wireless component. This is even more chilling because, if you believe Stringl, Verizon is taking "a disproportionate share of the industry (wireless) gross adds."
Another shiver should run through cable when Stringl predicts "FiOS is helping us in the small business market" that cable is stutter-stepping into. Of course, he also qualified that by saying FiOS was not helping "to any great extent at this point," but that prospects looked good for 2008. Economic factors The other fearsome forecast came from both Verizon and AT&T. The economy may tank, but people are going to continue to buy services from their phone companies – especially wireless services.
"Doreen and I remain confident about 2008 despite all the noise we’re hearing about the economy," Stringl proclaimed.
AT&T executive vice president/CFO Rick Linder even went so far as to infer that jobless people and inflation that’s running wilder than Britney Spears’ behavior was somehow a media contrivance.
"There’s been an awful lot of noise in the market and media about the economy," Linder told analysts. "We feel good about our guidance and plan for 2008."
AT&T, he admitted, suffered some "softness" in its broadband numbers in 2008 – especially in those troublesome Midwestern states – but it wasn’t anything to worry about and had been "baked into" (another of those terms the money folks love) 2008 financial predictions.
"The economy is always a risk, but I think when you look across our business, we’re relatively defensive in nature in these kinds of downturns and wireless in particular … the ARPU growth is being driven by data, and that data growth is being driven by new devices, new smartphones, new integrated devices and the move to 3G. Together, those things are opening up a whole new host of applications that will bring value and will be very interesting to our customers. That makes us feel very good about the outlook for wireless as we go into 2008," he concluded.
Did we mention that the cable industry has no discernible wireless play?