Altice USA Adds a Mere 14K Mobile Lines in Q3
Altice USA's new mobile service added just 14,000 lines in Q3 2019 as the company initially focused on selling the offering through its brick-and-mortar stores while its online sales distribution channels are still developing.
Notably, sales of Altice Mobile were open for less than a month in the Q3 period, as the service was launched in early September. Although Altice Mobile -- a service built on a "full" MVNO deal with Sprint as well as an additional roaming deal with AT&T -- has initially centered on optimizing customer service and the onboarding/porting process, the company expects mobile sales volumes to ramp up as it opens up digital and e-commerce channels "soon," Dexter Goei, Altice USA's CEO, said Tuesday in a briefing with reporters.
Altice Mobile launched with a bring-your-own-device option, but, early on, has limited handset sales to Altice USA stores, which traditionally have been used to handle service-related issues as opposed to sales offices.
While the online/digital distribution channel for its mobile service is on the way, the initial delay has caused Altice USA to adjust its full-year 2019 revenue targets downward -- it now expects revenue growth of about 2.5% on a year-on-year basis, versus earlier expectations of 3% to 3.5%.
Altice Mobile generated revenues of $3 million in Q3 during the slow start. The MSO debuted the service in early September with a $20 per line per month "price for life" pitch for its existing Optimum and Suddenlink cable customers, and $30 per line per month for others.
Goei noted that Altice USA is holding off on massive marketing of Altice Mobile until all sales channels, including online, are open.
Update: On a follow-up call with analysts, Goei said Altice Mobile expects to open up digital and online handset sales within the next two to three weeks. "We see a tremendous amount of traffic on our sites but they literally stop ordering when they can't get any handsets, so we know that that's going to drive incremental volume," he said.
Altice USA's other residential subscriber numbers were impacted in Q3 by an OSS/BSS migration that shifted all of its customers in the Suddenlink and Optimum service footprints to the same platform.
Altice USA lost 32,000 video subs in Q3 (compared to a loss of 28,000 in the year-ago period), but noted the video sub loss would have been 28,000 if not for the OSS/BSS migration. The company added 15,000 broadband subs in Q3, but estimated that adds would have risen to 24,000 without the OSS/BSS migration adjustment.
Across services, all Altice USA customer relationships rose 0.7% in the period, a small rise from an increase of 0.6% in the previous quarter.
Altice USA said it had 492,000 unique customers on Altice One, its all-services gateway platform. That total represents 15% of its overall video customers, up from 7% in the year-ago period.
Goei also warned that Altice USA could see sub losses in Q4 as customers roll off earlier promotions. In turn, Altice USA shares fell more than 8% in after-hours trading Tuesday.
Altice USA's somewhat flat results and low Q4 expectations earned a word of caution from Craig Moffett, analyst with MoffettNathanson. "The warning about higher churn in Q4 due to promotional roll-offs will only heighten anxiety, as it speaks to unit growth deceleration, which may be the greater concern," Moffett explained in an emailed research note issued Tuesday.
But Moffett still believes Altice USA's stock is "too cheap," and continues to affix it with a "Buy" rating and a target price of $38.
FTTH upgrade rolls on
Altice USA made progress with its fiber-to-the-premises network overlay upgrade, estimating that more than 500,000 homes are now ready for service with FTTP.
Altice USA will use DOCSIS 3.1 to deliver a gigabit broadband service in the coming months, but its FTTP network will be used for multi-gig services.
"We view fiber-to-the-home as an end-state network, which is superior to other future DOCSIS network upgrades," Goei said.
Lightpath talks continue
Business services grew 3.9%. Goei said Altice USA continues to have discussions about strategic options for its fiber-based Lightpath business services unit, but stressed that any partnership must have "real value" and offer a way for the MSO to grow that business. "To the extent that we don't find a partner on Lightpath, we're prepared to do a geographical expansion of Lightpath organically," he said.
HBO Max is'complementary'
Goei also weighed in on HBO Max, an upcoming SVoD service from AT&T/WarnerMedia set to launch next May at $14.99 per month.
While noting that it's too early to make any firm judgements on that service, Goei said HBO Max "is really for someone who's not a cable subscriber" or doesn't mind paying an extra premium for it. "It is complementary but only … complementary for those broadband-only subscribers," he said.
- Altice USA Revenues Inch Up to $2.44B in Q3
- Altice Mobile Expects to Be in the Black Within 12 Months
- Altice Mobile Debuts $20 Per Month 'Price for Life' to Optimum & Suddenlink Subs
- Altice USA Signs AT&T to Nationwide Roaming Deal
- HBO Max Might Rankle Pay-TV Distributors
- Altice USA 'Reviewing' Future of Lightpath Unit
— Jeff Baumgartner, Senior Editor, Light Reading