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New Altice CEO, a former cable guy, backs Altice USA's big fiber bet

Dennis Mathew, the new Altice USA CEO and a former long-time Comcast exec, cheered his new company's strategy to upgrade parts of its cable network to fiber-to-the-premises (FTTP), which means skipping over DOCSIS 4.0.

"I'm a big believer in fiber as the best broadband technology that exists today, so that's a key tenet of the Altice strategy, which I'm very optimistic about," Mathew said Wednesday on the company's third-quarter earnings call. The call served as Mathew's formal introduction to the financial community after succeeding Dexter Goei as Altice USA's CEO on October 3.

(Source: Richard Levine/Alamy Stock Photo)
(Source: Richard Levine/Alamy Stock Photo)

Mathew's view falls in line with Altice USA's fiber-focused approach. He takes the helm at Altice USA as the company plows ahead with a plan to upgrade 6.5 million passings to FTTP by 2025 and pair that with the launch of symmetrical, multi-gigabit speeds.

And the view of Mathew and his new company is also in complete contrast with the strategy underway at Comcast. Mathew's former employer is zeroing in on a plan to upgrade its hybrid fiber/coax (HFC) plant to DOCSIS 4.0 to bring about widescale symmetrical multi-gigabit services rather than overbuild itself with FTTP.

Altice USA made progress on its FTTP initiative in Q3 2022 as it built out fiber to an additional 321,000 locations passed. That compares to 270,000 passings in Q2 2022 and 44,000 in the year-ago quarter. The company expects the pace to slow in the fourth quarter as colder weather slows down plant construction.

Click here for a larger version of this image.  
(Source: Altice USA Q3 2022 earnings presentation)
Click here for a larger version of this image.
(Source: Altice USA Q3 2022 earnings presentation)

Altice USA ended Q3 with 1.9 million FTTP locations passed. It added 31,000 fiber subs, extending that total to 135,000.

Fiber strategy questioned

Altice USA's fiber strategy does show promise for subscriber growth, lower churn and higher average revenue per user over its legacy cable broadband services. But not everyone agrees that Altice USA's fiber upgrade strategy is guaranteed to pay off or poised to fix what some perceive to be the company's bigger issue – high prices.

Altice USA has a pricing problem, not a technology problem, according to Craig Moffett, an analyst with MoffettNathanson, a division of SVB Securities. "Their rack rate prices are far higher than those of peers," he explained in a Wednesday research note.

Moffett also argues that evidence that fiber will offer a unique technical advantage over Altice USA's legacy hybrid fiber/coax (HFC) plant "is thin, at best," and that the operational savings from a move to fiber "won't be nearly large enough to cost-justify the investment."

That debate aside, Mathew has some clear challenges ahead – namely returning Altice USA to growth amid rising competition.

Mathew didn't go into great detail about his plan for Altice USA, but noted that he's exploring ways to accelerate the company's go-to-market strategy, align its product portfolio and take a closer look at its packages and offers.

"As I look ahead, I think we need to focus on disciplined execution and customer experience in order to maximize our investments and to return to broadband growth," he said.

Overall broadband losses accelerated in Q3

Though fiber results were positive, Altice USA's overall broadband struggles continued in Q3. The company lost 43,000 residential broadband customers, which widened from a loss of 13,000 in the year-ago quarter.

Those subscriber losses came from both the rural-focused Suddenlink footprint as well as Altice USA's Optimum service areas concentrated in New York, New Jersey and Connecticut. While higher churn is a primary issue in the Suddenlink areas, the main culprit in the Optimum region is a relatively saturated market.

Goei, who now serves as executive chairman of the board, attributed the broadband loss to a mix of lower market activity and competitive pressure from both fiber and fixed wireless access (FWA). "It's clear that fixed wireless broadband is taking some of the growth and switchers out of the market in the past few quarters … as well as some localized pressure from fiber overbuilders," he said.

Goei said he believes Altice USA is on track to return to broadband growth amid the fiber network buildout and expansion opportunities coming from government subsidy programs, the launch of multi-gig services and customer experience improvements.

"We are seeing some rays of sunshine coming in," he said.

Total revenues were down 7% due to pressure on Altice USA's residential and advertising business and the loss of AirStrand (outdoor small cell) revenues after its prior contract with Sprint (now part of T-Mobile) was terminated. Without AirStrand, Altice USA's revenue would've been down 4.3%. Business services declined 16.8% but would've been flat, excluding the loss of AirStrand revenues.

Suddenlink update

Goei offered a brief update on the company's exploration of a possible sale of its Suddenlink footprint.

"I think it's fair to say we're getting to a place where a decision is pretty imminent as to whether or not we're going to do something," he said. Goei acknowledged that Altice USA had received interest from potential buyers interested in acquiring separate pieces of Suddenlink.

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— Jeff Baumgartner, Senior Editor, Light Reading

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