Consolidated 'no longer projecting' fiber completion by 2026

Consolidated Communications no longer intends to complete its fiber upgrade by 2026, said CEO Bob Udell on the company's Q2 2023 earnings call. Rather, the company will remain "diligent and nimble in order to pursue government partnership opportunities with a focus of balancing the number of passing and cost efficiencies of our build," he added.

This isn't the first time Consolidated pushed back the date on its fiber buildout. The company originally said it would upgrade about 70% of its total passings, or 1.6 million locations, by the end of 2025, which was later delayed to mid-2026 as of the company's last earnings call.

But the latest comments come as Consolidated, like others in the space, is pursuing and eyeing millions of dollars in federal and state funding opportunities, including forthcoming grants from the $42.5 billion Broadband Equity Access and Deployment (BEAD) program, which won't roll out to service providers for at least another year.

According to Udell, Consolidated has been awarded $160 million in broadband grants since 2019 and is "actively pursuing" roughly $110 million in additional funding opportunities, separate from what it expects to receive through BEAD.

While BEAD revenues are "too early to project," he noted that Consolidated is "working with the state broadband offices on their respective plans and believe that the BEAD partnership opportunities across our footprint are quite significant."

Related:Minority shareholder wants Consolidated to reject Searchlight, BCI bid

Consolidated still expects to reach "approximately 50%" of its addressable market with fiber by year end.

Fiber up, revenue down

Consolidated turned in another record quarter for Fidium Fiber growth. That growth helped offset overall revenue declines, primarily from lower voice revenue (down $6.4 million), plus lower video network access and other products and services revenue, said CFO Fred Graffam. Overall Q2 revenue came in at $275.2 million, down $8.5 million year-over-year.

The company added a record 18,651 consumer fiber subscribers (up from from 9,643 fiber net adds last year) and reported 6,967 consumer broadband net additions overall. Consumer fiber revenue was $29.6 million, driven by increased average revenue per user (ARPU) of +5.1%.

Additionally, execs said Consolidated set a new record in July of nearly 7,300 fiber net additions in the month, positioning the company for third quarter fiber broadband growth.

"Our fiber investment thesis remains intact," said Udell. "Overall broadband usage continues to rise and consumers' desire for faster speeds and more reliable connections continues to increase. These industry trends align well with our Fidium Fiber product offering, which we believe is superior to cable and fixed wireless."

Related:Consolidated points to fiber strategy as 'main driver of business' this year

Return to growth in 2024

Overall, the company is still projecting a return to revenue growth in 2024, driven by "continued progress in our consumer fiber business" as well as "aggressive steps to simplify our business, achieve efficiencies and lower our cost structure," said Graffam.

One step the company took recently, not mentioned on the earnings call, was laying off some of its Vermont workforce. The company confirmed to local publication VTDigger last week that it was reducing its workforce in the state by less than 5%, as it "is taking steps to manage costs within a highly competitive industry while aligning resources and continuing our investments to transform from a copper-based telco into a leading fiber first provider." According to VTDigger, Consolidated employed roughly 220 employees in Vermont.

Executives on Tuesday's call otherwise referenced Consolidated's decision to sell its Washington state assets to Palisade Infrastructure for $73 million. "We expect the transaction to close in the second half of 2024 and intend to use the proceeds to bolster our liquidity and fund additional fiber expansion," said Graffam.

Related:Searchlight and BCI bid to take Consolidated private

Consolidated is also still considering a proposal from Searchlight Capital Partners and British Columbia Investment (BCI) to acquire outstanding shares in the company – one opposed by a minority shareholder – but Udell pointed to the special committee considering the deal and declined to offer further comment.

"A special committee consisting of independent directors of the board is discussing the proposal with the bidders. We are unable to comment any further at this time as the process is ongoing and there can be no guarantee as to the outcome of such discussions," he said.

Lead issue

Finally, Udell also addressed the lead cable issue that rocked the industry last month following a series of reports from The Wall Street Journal.

"Based on the most current information we have, we estimate less than 1% of the company's 100,000-mile copper network contains cable with lead sheathing. In fact, we have not installed lead-sheathed cables for more than 50 years," he said.

"We operate in rural and smaller communities where infrastructure deployments historically happened at later dates. Thus, many of our areas never had lead cable utilized," Udell added. "We have a history of and will continue following all applicable local, state and federal environmental laws and safety regulations. We will continue to follow the science and work collaboratively with regulators, the industry and our trade association to engage in constructive conversations on this topic."