Video Subscriber Addition Momentum Shifts to Telephone Companies in 4Q’08

The facilities based video services offered by AT&T, Inc. (AT&T) and Verizon Communications, Inc. (Verizon) continued their strong momentum during the fourth quarter of 2008 (4Q’08), according to a Fitch Ratings special report published April 6, 2009. During 4Q’08, revenue from Verizon’s FiOS product platform grew approximately 42% (on a year-over-year basis) and accounted for 31% of consumer retail revenues while AT&T’s consumer internet protocol revenue, which includes U-verse service (broadband and U-verse video service), contributed 26% of AT&T’s consumer-in-region revenues and expanded by 21.4% relative to the same period a year earlier.

Video subscriber addition momentum during 4Q’08 clearly shifted away from the large cable multiple system operators (MSOs) to AT&T, Verizon and DIRECTV. The deteriorating economy and intense competition for new video subscribers have translated into slower growth of new customers and slower overall revenue generating unit growth for the cable MSOs. Collectively the largest cable MSOs lost approximately 427,000 basic video subscribers during 4Q’08 (versus a loss of 216,000 basic subscribers during the 4Q’07), while AT&T, Verizon and DIRECTV added approximately 868,000 new video subscribers.

Trends identifying the scope and depth of the competitive overlap of leading telecommunications operators can be found in Fitch’s U.S. Communications Industry Leaders Competitive Scorecard special report for 4Q’08. The report compares the competitive positions of the leading local exchange carriers, cable MSOs, wireless service providers and direct broadcast satellite operators. The report summarizes key operating metrics financial statistics, particularly related to key forecast items such as revenue growth, margin changes, capital re-investment and debt. Additionally, the report includes summary comments concerning key developments in the quarter.

This quarterly report can be found on Fitch’s web site at www.fitchratings.com and can be quickly located by clicking on Corporates under the Corporate Finance header and then clicking on special reports once in the Corporates Home Page.

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