Consolidated Communications reported third quarter results on Tuesday, demonstrating continued growth in the fiber department as the company pursues a strategy to upgrade 70% of its addressable copper market to fiber broadband by 2025.

For Q3, Consolidated added 12,100 Fidium Fiber subscribers and grew its fiber customer base to 116,000, a 42% increase from a year ago. Executives noted on an earnings call that fiber customer gains outpaced DSL losses for the second consecutive quarter. Of customers shifting from copper to fiber, execs said that over 70% are choosing Consolidated's 1-Gig service. That's up slightly from 65% last quarter.

With Q3 factored in, Consolidated now passes roughly 950,000 locations with fiber – or 34% of its service area – and according to CEO Bob Udell, it is on track "to complete at least 400,000 fiber location upgrades this year and reach 1 million total fiber locations."

Figure 1:

The company intends to upgrade an additional 1 million locations over the next three years.

'Actively pursuing' grants

Consolidated hopes to support that growth through government grants, particularly as states prepare to distribute their share of funding from the $42.5 billion Broadband, Equity, Access and Deployment (BEAD) program. Execs said they are "actively pursuing" opportunities to receive broadband grants through existing programs and forthcoming infrastructure funding.

"We're tracking roughly $170 million in broadband government partnership opportunities throughout our service area," said Udell.

Consolidated execs also reassured investors and analysts that these investments would pay off long term.

"Fiber broadband is a resilient and scalable product with a decade's worth of runway. It offers faster symmetrical speeds with the lowest latency ever," said Udell. "And given the critical importance of being connected, we expect fiber broadband will be resilient during challenging economic times."

Furthermore, Consolidated is well positioned because it operates in a "favorable competitive footprint," said Udell, with limited wireline and fixed wireless competitors.

"90% of the markets that we serve have just one or less wireline cable competitor. Also, the fixed wireless competition in our markets is limited due to the terrain in certain regions. Our Fidium Fiber product is providing our communities with a superior technology that isn't available from other service providers who are generally focused on more populated cities," said Udell.

Financial snapshot

Consolidated Communications reported Q3 revenue of $296.6 million, with consumer fiber revenue growing approximately 40%. The company saw operating expenses increase by $7.5 million owing to "marketing expenses" and "increased utility and fuel costs." The company is also spending roughly $600-$650 per fiber passing – which is an increase for Consolidated from last year when it cited figures of $450-$500, but still "significantly below our peer group," said CFO Steve Childers.

According to Childers, the average revenue per user (ARPU) for Consolidated's Fidium Fiber service was $65.61 for Q3, a sequential increase of $0.66.

Consolidated's Q3 subsidy revenue fell by $10.1 million to $7.2 million for the quarter, reflecting a transition from the CAF II program to Rural Digital Opportunity Fund (RDOF) subsidies.

The company also closed on its sale of wireless partnerships to Verizon in Q3 for $490 million in gross cash proceeds, "which will be used to support our fiber broadband expansion and growth plan," said Childers.

In addition to seeking government subsidies, Udell noted the company is considering divesting an additional $200 million in assets to fund its fiber build but said there is "nothing to announce or add at this time."

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— Nicole Ferraro, editor, Light Reading, and host of "​​The Divide" podcast.