Altice USA leans into mobile as broadband losses widen

Altice USA is preparing to expand its mobile roadmap this year. The operator looks to accelerate growth in the category while continuing to weather accelerating broadband subscriber losses.

Altice USA's mobile roadmap for the year includes support for tablets and smart watches, a device protection program and online sales of additional electronic accessories. Device protection is starting to become a focus among cable operators that also sell mobile services. Among recent examples, Charter Communications launched a program for Spectrum Mobile that sells for a flat fee of $5 per month per device.

Altice USA recently broadened its mobile strategy by offering services to business customers.

Altice USA, which offers mobile through an MVNO pact with T-Mobile, is seeing accelerated customer growth in mobile. In Q1 2024, the company added 29,300 mobile lines, up from a gain of just 7,600 mobile lines. The company ended the quarter with 351,600 mobile lines, representing a 5.3% penetration rate of its broadband base, up from 3.5% in the year-ago period. Meanwhile, mobile average revenue per unit (ARPU) grew $4.30 in Q1 versus a year ago.

(Source: Altice USA Q1 2024 earnings presentation)

Mobile line gains are rising as Altice USA expands its mobile sales channels. The company's customer care and retention teams are now equipped to sell mobile and Altice USA's physical retail centers are morphing into mobile sales centers, Dennis Mathew, Altice USA's chairman and CEO, said Thursday on the company's Q1 earnings call.

Related:Altice USA takes its 'medicine' as it cuts broadband prices

At the end of the quarter, about 64% of Altice USA customers were on its Unlimited or Unlimited Max plans. The company said it sees a 20% churn reduction when customers pair mobile with home broadband.

"We are optimistic about the trajectory of this business," Altice USA CFO Marc Sirota said.

Broadband losses widen

Altice USA's mobile momentum is dampened by ongoing home broadband subscriber losses as the company grapples with a slow housing move environment and heightened competition from fiber and fixed wireless access (FWA) service providers.

Altice USA lost 29,400 broadband subscribers in Q1, compared to 19,200 subscribers during the year-ago quarter. The company ended the period with 4.14 million broadband subscribers.

Fiber is a bright spot. Altice USA added 53,200 fiber-to-the-premises (FTTP) subs (51,400 residential and 1,900 business), up from a gain of 38,100 fiber subs in the year-ago period. The operator ended Q1 with 394,600 fiber subs (385,200 residential and 9,400 business).

Altice USA added 44,800 fiber passings in the quarter, ending the period with 2.78 million. The company expects to add 175,000 new fiber passings in 2024, down from additions of 576,400 in the year-ago period.

Related:Altice USA prioritizes fiber subscriber 'migrations'

That slower fiber build pace comes as Altice USA focuses more on transitioning existing customers on hybrid fiber/coax (HFC) networks to the company's new fiber network. About 70% of fiber subscriber net adds in Q1 came via migrations of existing subs, with 30% representing net new customers.

Alongside fiber upgrades in the east, Altice USA is also upgrading HFC networks in its western footprint. The company expects to have 100% of its western cable properties upgraded to DOCSIS 3.1 by year-end.

Altice USA ended the quarter with about 130,000 customers (about 3% of its broadband base) who benefit from the Affordable Connectivity Program (ACP), which will soon run out of funding without further government action. The company hopes to retain ACP recipients through various lower-cost mobile and broadband programs, including a 100 Mbit/s service that sells for $25 monthly.

Focus on streaming boxes, new pay-TV options

Altice USA shed another 77,700 video subs in the quarter, up from a year-ago loss of 58,600. The company ended Q1 with 2.09 million video subs.

Altice USA continues to shift its video base to a new streaming platform powered by Android TV that supports the operator's pay-TV app alongside third-party direct-to-consumer streaming services. The operator is rolling out that device, the Optimum Stream, across its east coast footprint (in New York, Connecticut and New Jersey) and is starting to introduce it to its more rural systems in the west. The company intends to rely more heavily on the self-install model.

Mathew said Altice USA would soon introduce two additional video service tiers that will provide more "optionality" to customers but didn't elaborate on the details.

Bigger picture issues

Altice USA's Q1 results arrive as the company attempts a broader turnaround plan, which includes a range of pricing adjustments alongside a slew of speed upgrades for existing customers.

There are also rumors that Charter Communications has explored a possible acquisition of the company. In a research note (registration required) issued today, MoffettNathanson analyst Craig Moffett views such a transaction as "a mere fantasy" given Altice USA's pricing issues alongside the regulatory risk such a deal would bring.

While Altice USA won't face debt maturities in the next couple of years, it will have roughly $7 billion to deal with soon enough. Moffett noted that the provider is "facing what could well be an insurmountable maturities wall in 2027."

At the moment, the bigger picture is that Altice’s house is on fire, and the exit doors all appear to be blocked. But it still has time to fix its problems.

Said Moffett: "If they can prove they can grow, the debt markets will reopen, at least giving them the benefit of more time to find solutions. If they can’t, bankruptcy will likely be the only option."