Still reeling from customer and revenue declines, Frontier is looking to gain some salvation by taking a plunge into the OTT video business.
Speaking on the company's fourth-quarter earnings call earlier this week, Frontier Communications Corp. (NYSE: FTR) President & CEO Dan McCarthy strongly hinted that the large US telco could launch its own direct-to-consumer streaming video service sometime soon because of technology advances and "some changes in the landscape" on the OTT end. While he didn't offer any specifics, he indicated strong interest in the idea as one way to generate fresh growth.
"So I think we could spend time developing our own or we may partner with others," McCarthy said in response to an analyst's question, according to a transcript of the earnings call supplied by Seeking Alpha. "But I think that will be an important part of our strategy going forward."
The proposed move comes as Frontier frantically tries to recover its equilibrium after its botched takeover of three large Verizon Communications Inc. (NYSE: VZ) wireline properties last year. Company executives are casting about for ways to re-stoke customer and revenue growth after reporting their fourth straight quarter of poor earnings results this week and laying off 1,000 workers last fall. In the latest quarter, for instance, Frontier lost 144,000 residential and 14,000 business customers as its overall revenue fell from $2.5 billion to $2.4 billion and it ran up a net loss of $80 million. (See Frontier Lops Off 1,000 Jobs in Big Overhaul and Frontier Eyes Second Half Rebound.)
If Frontier does venture into OTT video, it would be following in the recent footsteps of CenturyLink Inc. (NYSE: CTL), which is now trialing an OTT service in four markets and plans to launch the offering commercially sometime this spring and then extend the service throughout its footprint over the rest of the year. In their own fourth-quarter earnings call earlier this month, CenturyLink executives said they are also exploring the idea of licensing the new DirecTV Now OTT service from AT&T Inc. (NYSE: T). (See CenturyLink Embraces OTT Video.)
Like CenturyLink, Frontier is also scaling back its formerly grand IPTV ambitions after running into serious system integration issues with the three new Verizon systems in California, Florida and Texas and realizing that there might be more cost-effective ways to deliver video service. Instead of leveraging its fiber-to-the-node (FTTN) network to offer IP video ultimately to 7 million homes across its enlarged footprint, the telco is now focusing on serving up IPTV in just five markets.
"We did roll out to a number of markets last year," McCarthy said. "We had anticipated going full throttle on those markets, but they were caught up in the whole disruption of what happened following the integration… What we decided at this point to really do is focus on those five markets, evaluate them, ensure that where we're and what we thought would be profitability and good growth rates are there."
Similar to CenturyLink again, Frontier is also raising broadband speeds throughout its territories, although it's not offering anything near the gigabit services of the bigger telco. Over the course of last year, for instance, Frontier completed the extension of 50Mbit/s speeds or higher to 1 million households, including at least 200,000 copper-only homes.
In addition, like CenturyLink once more, Frontier is looking to build up its commercial services presence. As part of its corporate restructuring last year, it created a new, separate commercial division to focus on small and mid-sized businesses.
Even with all this activity, Frontier intends to trim its capital spending a bit this year. Plans call for spending $1 billion to $1.25 billion on capital improvements in 2017, down from more than $1.4 billion in 2016.
— Alan Breznick, Cable/Video Practice Leader, >Light Reading