Frontier 'very willing to explore all alternatives' amid investor pressure

Frontier Executive Chairman John Stratton stressed that he and the board are open to discussion as the company faces pressure from an investor to conduct a strategic review of the business and consider various options, including joint ventures and a sale of certain assets or of the full company.

"We are highly attuned to M&A and the strategic landscape in which we operate," Stratton said Tuesday at the UBS Global Technology, Media and Telecom Conference. "We have an ongoing dialogue with our key shareholders. We listen very carefully to their feedback, to their input. We value their perspective; we take it quite seriously."

Stratton stressed that he's not at liberty to publicly disclose the contents of those discussions. However, Frontier is "very willing to explore all alternatives that may be present for us to achieve our number one objective, which of course is to achieve a maximum value creation for our shareholders … Everything's on the table."

Stratton was asked to address the situation a day after Jana Partners issued the board a letter urging the company to "immediately" conduct a comprehensive strategic review of the company and a revised path that could boost Frontier's stock price.

For the moment, Frontier is laser-focused on building and selling fiber services alongside an ambitious plan to build fiber-to-the-premises (FTTP) to about 10 million locations by the end of 2025. Frontier ended Q3 with about 6.2 million fiber locations.

Related:Frontier under more pressure to review its business, possibly sell

The aim is to eventually hit a "steady state" across that fiber footprint that includes a penetration rate of about 45%, driving $4 billion of annual EBITDA and paring it with ARPU (average revenue per user) growth. Frontier anticipates Q3 2023 ARPU growth of 3% to 4%, a range expected to carry over to 2024.

Stratton said 2023 is shaping up to be a "watershed year" as Frontier is poised to deliver EBITDA growth for the first time in many years.

Frontier's copper-to-fiber transition "is a very critical component of that momentum," Stratton said.

Frontier's fiber buildout could expand as Frontier explores the opportunity afforded by the $42.45 billion Broadband Equity Access and Deployment (BEAD) program.

Stratton said Frontier has assembled a team dedicated to managing the "twists and turns of the BEAD process," calling the program a "once in a generation opportunity."

"This is something we expect to be very active in," he said of BEAD.

Cable's had a 'nice run,' the mobile bundle can wait

As for competition, he said Frontier continues to see only a "limited impact" from fixed wireless access (FWA) services overall and perhaps only at the edges of legacy DSL networks.

Related:T-Mobile may be backing a play for Frontier – analysts

Echoing what some cable operators are saying, Stratton also doesn't view FWA as a "compelling proposition for consumers in the residential context," holding that FWA also won't have enough capacity to handle longer-term broadband demand.

He said recent data shows consumption among Frontier homes in the range of 1 TB per month, and up to 2 TB among the "top profile" of the base.

Meanwhile, he expects cable to stay active with promotions and pricing changes. "As we bring fiber networks to bear, the competitive dynamics change completely," Stratton said

"It's been a nice run for cable," he said. "I would've loved the opportunity compete with DSL with a cable product…for a decade-plus."

And there's no change in Frontier's position on adding mobile to the bundle. Stratton said there's no need for it, at least for now.  

"We've seen no evidence that that's needed," Stratton said, noting that Frontier is growing its fiber subscriber base and that the company believes its capital is best spent converting its copper networks to fiber.

But he allowed that Frontier has the internal expertise to quickly spin up a mobile initiative. "If a change is warranted, we'll certainly consider that," he said.