SBC revenue inches up; video waiting in the wings

SBC Communications today reported consolidated second quarter revenue (not including Cingular) of $10.3 billion, up 0.8% from the year-ago quarter, helped in part by the company’s first positive quarterly growth in wireline revenues in nearly three years.

Wireline revenues grew 2.1% on a sequential basis to $9.2 billion, driven in part by increased bundling and the net addition of 315,000 DSL customers. And while that number was slightly less than the company was hoping for, Richard Linder, CFO for SBC, said the RBOC was impacted by the threat of a widescale strike by the Communications Workers of America.

“Seasonality had an impact with the end of the school year, and secondly, strike preparations dampened our sales effort,” Linder said during a call with analysts this morning. “After the strike was settled near the end of May, our weekly net adds accelerated in June.” SBC also clearly benefited from the number of bundles its customers were taking. Nearly three-fourths of the company’s retail consumer now has at least a simple bundle of local voice plus one calling feature, while 54% have a key product bundle that includes a local access line plus long distance, wireless, DSL or DISH Network service through SBC. The average revenue per user on those who have bundles of any kind is almost twice as much as those without, Linder said.

The last element of that bundle--satellite-based video service--also had a minor but meaningful impact this quarter. As of June 30, SBC had 121,000 SBC / DISH Network subscribers in service, with 100,000 of those added in the second quarter. More important, the successful launch--which came with virtually no advertising--is pushing the company forward with a video strategy over FTTP and FTTN networks that will get its first field trials this summer.

“Our marketing approach with DISH has and will be very focused,” Linder said. “We view the DISH Network product as complementary to a longer-term fiber and network development strategy.”

Though the company won’t divulge all the details yet, SBC has given clear indications that it is moving toward a pure IP TV offering that could include video on demand and HDTV as well as traditional broadcast services. However, Linder cautioned that the company only would move forward with the fiber builds if the regulatory environment is to its liking.

“We’re encouraged by the FCC’s initial position and movement toward taking more of a deregulatory stance on next-generation broadband platforms and services, including IP-based services,” Linder said. “We want to see and need to see additional clarity to make sure that the investments that we make in this technology platform are not going to be encumbered by a regulatory framework in such a way that we don’t see a clear path to earning a return on that investment.”