Frontier Broadband: Record Fiber Builds, ARPU Gains, But DSL Hurts Results

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Frontier made broadband available to a record 185,000 locations in the third quarter and saw a 10% year-over-year increase in average revenue per user (ARPU) for fiber customers . But fiber gains were not enough to offset losses among copper subscribers, which fell to 1.264 million from 1.297 million in the second quarter.

Copper losses weighed heavily on overall results, causing broadband revenues to fall from $ 1.513 billion in the second quarter to $ 1.493 billion, although the company saw increased income on the fiber side from $ 679 million to $ 684 million over the same period.

Some of Frontier’s net fiber gains are a direct result of net copper losses, as the company upgraded existing services in some areas. But Frontier President and CEO Nick Jeffery noted during today’s earnings call that the “overwhelming majority” of fiber additions came from customers who had just discovered Frontier. And according to Frontier financial data, the number of copper passages fell from just 200,000 to 11.5 million, from 11.7 million in the second quarter.

Frontier Fiber Builds

Frontier has set itself the goal of becoming the largest pure fiber supplier in the country and making fiber available to 600,000 new locations this year and 6 million more by 2025, when fiber would be. available in 10 million locations.

And while it may take a while for the fiber gains to offset the copper losses, other financial measures from Frontier offer cause for optimism:

  • The churn rate for broadband consumers, including fiber and copper customers, has declined 31% in the past year – an achievement the company attributes to improved customer service.
  • The company is seeing high utilization rates for gigabit speed service – a development that bodes well for the company’s plans to roll out 2 Gbps service.
  • Upgrades to broadband service were one of the main drivers of the 10% increase in fiber ARPU in the third quarter
  • Customer demand for upstream bandwidth increased more during the COVID-19 pandemic than it did in the previous five years combined – a development that Jeffery says gives the company an edge over the years. compared to cable competitors.

“If you take our entry-level price for 500 megabits [symmetrical] service, [customers] can’t buy this at any price from a competitor, ”he said in response to a question from a financial analyst on today’s earnings call.

He also noted that “Although we build aggressively, we are smaller than our major cable competitors” and there may be situations where it is “potentially more expensive. [for the cable companies] react than not react.

Source: Frontier

While Frontier clearly faces a long battle to overcome its DSL copper heritage, it looks like the company is on the right track.

As MoffettNathanson’s telecommunications and broadband financial analysts said in a research note today, “The benefits of the modernization plan will take time, possibly years, to begin to significantly impact the economy. Frontier income statement ”.

A “conservatively bullish” view on Frontier is “warranted,” the researchers wrote.


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