Are Landlines Headed for Extinction?
Landlines still hold vintage value, but when did old-world charm ever make business decisions? A recent government study showed that 32 percent of American homes are now cellphone-only households, which would explain recent revenue reports from telecom companies. Verizon’s (NYSE:VZ) landline revenue has fallen 19 percent since 2007, and AT&T’s (NYSE:T) revenue is down 16.5 percent over same period.
The rate of landline use by households is falling rapidly now. In 2008, only about 16 percent homes were mobile-only, while the rate was half that in 2007.
Earlier this week, AT&T sold off its Yellow Pages service, a relic from the landline days, and is contemplating doing the same with the rural parts of its fixed line unit. AT&T chief executive Randall Stephenson announced last month that the company would “review its portfolio of assets.”
AT&T’s plan echoes the actions of Verizon, which sold large parts of its rural landline business in 2010 to Frontier Communications (NASDAQ:FTR). Not surprisingly, Frontier hasn’t done much with its purchase, with sales falling in each of the six fiscal quarters since the deal closed — that means finding buyers has proved to be more difficult than the company likely expected.
There are some benefits of preserving parts of the landline service. While a large number of corporate clients still rely on it, another bigger advantage comes from the fact that their wireline infrastructure can help AT&T and Verizon grow their cable TV and broadband Internet businesses.
At the moment, the two companies’ ability to use that infrastructure for communications has meant they don’t need to pay the huge licensing fees that Sprint (NYSE:S) and T-Mobile do. Landlines are also still contributing to sales. Landline services accounted for 47 percent of AT&T’s revenue in 2011 to 37 percent for Verizon.
So while changing times are heralding a technology shift, the best option for AT&T and Verizon is to use the old business’s spin-offs.