Frontier Communications' streamlined pricing on broadband services is sizing up well against Charter Communications, Comcast and other cable competition as the telco pushes ahead with an ambitious plan to upgrade and expand its network with fiber.

That's according to an analysis from MoffettNathanson analyst Nick Del Deo, who issued a report (registration required) that reviews Frontier's progress nearly a year after the telco emerged from Chapter 11 bankruptcy.

Figure 2: Frontier has a plan to expand its fiber-to-the-premises (FTTP) footprint to 10 million locations by 2025, up from about 4 million today.
(Source: Gualtiero Boffi/Alamy Stock Photo)

Frontier recently simplified its residential fiber broadband slate with three uncapped and symmetrical speed tiers – 500 Mbit/s (starting at $49.99), 1 Gbit/s (starting at $74.99) and a recently launched 2-Gig service (starting at $149.99).

There are some variances, as Frontier's headline price in Florida for the 500-Meg service is $5 lower than some locations and includes a larger promotional gift card for new customers, Del Deo found. Pricing in fiber expansion markets such as Connecticut are even lower still, likely a function of Frontier wanting to "make a splash" in recently upgraded fiber markets, he added.

With respect to its 500-Gig and 1-Gig offerings, "Frontier's pricing across its markets is very competitive with cable offers at the same locations," Del Deo found.

Charter's closest offers in California, Texas and Florida have "similar headline prices, but with steep step ups after the initial 24-month price guarantee," the analyst added. Comcast, Del Deo found, is more expensive in Connecticut, and Altice USA's headline prices are similar.

"In general, these items make Frontier's offers incrementally more attractive than those of its cable peers," he added.

This is all coming together as Frontier plows ahead on a plan to expand its fiber-to-the-premises (FTTP) footprint to 10 million locations by 2025, up from about 4 million today.

Macroeconomic headwinds are a concern

Frontier continues to make progress nearly a year after coming out of bankruptcy, adding a record 45,000 fiber broadband subs in Q4 2021. But Del Deo also notes that Frontier is not out of the woods yet. Notably, its stock price has dipped 22% from a late November peak, with a wave of macroeconomic headwinds, including rising interest rates, inflation and ongoing supply chain constraints, viewed as the culprit.

Frontier has been able to navigate supply chain issues and has made genuine progress in its transformation, but "[n]one of these headwinds should be ignored," Del Deo wrote.

Among his concerns is that a depressed stock price adds risk as Frontier looks to shore up financing for the rest of its Wave 2 fiber build that will add 6 million more FTTP locations by 2025.

He also wonders if this scenario could lower the option value for a future Wave 3 build covering about 5 million locations that won't be built out during Waves 1 and 2, that aren't particularly financially attractive to build fiber. Frontier is evaluating several options for Wave 3, including supplemental government funding, working with partners and exploring potential divestments or system swap scenarios.

As these headwinds remain in play, Del Deo lowered his target price on Frontier to $33 (from $36), but maintained his "Buy" rating. Frontier shares were down 48 cents (-1.75%) to $26.88 each in midday trading Thursday.

"Frontier's fundamental performance has actually been solid. And with nearly a year having elapsed since the company emerged from bankruptcy, it's an appropriate time to evaluate how the company is performing vs. expectations," the analyst noted.

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— Jeff Baumgartner, Senior Editor, Light Reading