Adding a mobile component to Frontier Communications' broadband mix is intriguing, but for now the company will focus on upgrading and expanding its fiber network as it emerges from bankruptcy.
"Look, I think that is an interesting idea," John Stratton, executive chairman of Frontier's board, said Friday (May 30) when asked about the potential for Frontier to develop a mobile partnership that could help it gain and retain broadband customers in much the same way Comcast and Charter Communications are doing today via their MVNO pacts with Verizon.
"It's informative to keep an eye on Charter and Comcast's progress there, which has been pretty exceptional," said Stratton, a former Verizon exec. Last week, Charter announced it added 300,000 mobile lines in Q1 2021, while Comcast tacked on another 278,000 mobile lines. Combined, Comcast and Charter have about 5.77 million mobile lines in service.
Frontier, which exited bankruptcy on April 30 and is set to start trading on the NASDAQ under the "FYBR" ticker on May 4, has plenty on its plate – it has begun to build fiber to an additional 3.4 million home and business locations, and is evaluating if and when to do the same with an additional 6.7 million locations.
"We have a ton of opportunity right ahead of us right now, and what we want to be careful about is to not distract the company as we start the initial base business of building the fiber, expanding our marketing and sales capabilities," Stratton said on a call that reviewed the company's Q1 2021 results and provided more detail on the post-Chapter 11 vision for the company. "I would never say never to an opportunity like mobile, but in the near term we're going to focus on ... our primary fiber offerings."
Focus on fiber
Frontier's base fiber network currently passes about 3.2 million homes and businesses (a number that includes about 200,000 fiber locations added since January 2020), with 1.3 million customers now getting service on those fiber-to-the-premises (FTTP) networks.
Frontier's initial fiber buildouts will concentrate on markets expected to get the highest internal rate of return, largely identified as those in California, Texas, Florida and Connecticut. Frontier expects to extend its fiber network to 495,000 locations this year, and effectively double that deployment rate in 2022.
The vast majority of Frontier's network covering 11.8 million home and business passings is still DSL/copper, forming the hole that Frontier is now tasked with digging itself out of.
The company also believes it can achieve a penetration rate of 50% in its base fiber network, up from about 41.5% today. In new fiber areas, the plan is to ramp up to a penetration of 35% over a four-year cycle, then head up to 40%-plus.
To help establish a baseline and provide some insight into how its new fiber networks might perform down the road, Frontier will start to report out the financial and operational performance of its current, base fiber network. "We'll effectively put a wall around those [networks]," Stratton said.
Frontier reckons that its total fiber opportunity comprises about 13.3 million locations, including 12.1 million consumer passings. About 3.4 million new locations, including current copper locations, are set to be converted to fiber, with another 6.7 million to be evaluated.
Stratton said the new Frontier team and board expect to complete that strategic review in the next 100 days, and discuss the results in more detail at an investor day set to occur in August. Frontier estimates that its current fiber footprint has one or zero competitors, and 87% of its current copper footprint faces one or zero competitors.
New Frontier CEO sees similarities to Vodafone UK turnaround
On the call, Frontier CEO Nick Jeffery, who led a turnaround at Vodafone UK, discussed what drew him to Frontier as it worked its way out of bankruptcy. He said Frontier and Vodafone UK were similar in revenue size, but Vodafone had a more complicated offering (with both wireless and wireline) and faced more competition in a smaller market area.
But the similarities "really rang a bell for me, because I absolutely loved turning that company [Vodafone UK] around," Jeffery said. "And what I've seen in my first 40 days at Frontier is exactly the same set of things."
Beyond plans to accelerate Frontier's fiber buildouts and upgrades, a big focus is to improve the "operational basics" of Frontier, including the IT systems, adding or enhancing digital and automation capabilities, developing an overall better customer offer, along with "an absolute obsession with competition and winning in the market," Jeffery said.
"I have to be all over every move a competitor makes every second of the day, and to really be on top of customer trends, both as you see them and as you anticipate them," he added.
Frontier posed Q1 2021 revenues of $1.68 billion, down 6.3% year-over-year, with adjusted EBIDTA of $670 million, down 2.3%.
The company completed fiber builds to 100,000 locations in Q1 2021, and added 11,000 fiber subscribers in the period. Fiber ARPU rose $4 year-over-year, thanks to speed upgrades and price increases on new and existing accounts.
- Frontier headed for 'modest' growth following Chapter 11 – analysts
- Frontier set to exit Chapter 11 on April 30
- Former AT&T exec joins Frontier as chief network officer
- Vodafone UK loses CEO Jeffery to bankrupt Frontier
— Jeff Baumgartner, Senior Editor, Light Reading