Growth to be hard-won in 2009

The good news for Bell carriers is that despite economic turmoil, they can achieve growth in 2009. The bad news is how much. Shortly after the new year began, Craig Moffet, analyst with Bernstein Research, lowered his expectations for AT&T and Verizon, predicting 1% and 2% revenue growth, respectively, this year.

Wireless subscriber growth in particular should slow dramatically, Moffet said, cutting his outlook for new net subscriber adds by 1 million each for AT&T and Verizon, though he expects AT&T to continue taking wireless share this year.

The enterprise business could slow enough to be a drag on carriers' overall growth, Moffet said, lowering expectations of 1% enterprise revenue growth to -3.3%.

In a speech given at an investor conference in early January, Ivan Seidenberg, CEO of Verizon, predicted growth in 2009 but said his firm's enterprise business should be flat to slightly down this year. But because it only accounts for about 12% of Verizon's overall revenue, he said, “I'm not sure that's going to have that much effect on us.”

Seidenberg was unfazed by residential access line loss, claiming that, despite a drop-off in DSL subscriber growth last year, the growth of Verizon's fiber-to-the-premises network — expected to pass 15 million homes this year — is eclipsing the company's exposure to the legacy landline business. “Once we go into an area with FiOS, we win back the household,” he said.

Moffet concedes that, so far, average revenue per user (ARPU) growth from broadband penetration has offset much of the pain of access line loss. “But as the recession deepens, we expect access line losses to accelerate,” Moffet wrote. “And with broadband industry growth now slowing and telco broadband share in free fall, ARPU won't be much help.” As a result, he now sees 3% declines in Bell wireline businesses, where he previously saw a 1% to 2% drop.

The other good news: Things should start to improve in 2010.

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