- Operators are gearing up to report Q2 earnings
- Cable unsurprisingly continues to falter, and the end of the US Affordable Connectivity Program (ACP) doesn't help matters
- But AT&T, T-Mobile and Verizon are expected to report fiber and fixed wireless adds
As second-quarter earnings reports approach, cable providers are expected to report lean times, but fiber and particularly fixed wireless access (FWA) providers are eating well, according to analysts.
The faltering cable industry “remains depressed,” according to analysts at Wolfe Research, as valuation multiples for cable cos are at “near all-time lows.”
Charter and Comcast, for example, have valuation multiples that are 25% and 28% below their five-year averages, the firm noted. The companies in Q1 lost 72,000 and 65,000 broadband subscribers, respectively.
The end of the government’s Affordable Connectivity Program (ACP) isn’t doing operators any favors on the subscriber front. Charter had one of the largest ACP subscriber bases, with around 5 million customers enrolled in the program.
The ACP’s demise will lead to declining cable subs, partly offset by growing greenfield expansion through the U.S. Rural Digital Opportunity Fund (RDOF) and providers expanding their network footprints (known as "edge outs"), said Recon Analytics’ Roger Entner.
Charter has frequently touted the pace of its rural builds. WOW! is another cable operator that’s ramped up its greenfield deployments despite shedding broadband subs.
“Cable beats DSL, while FWA and fiber beat cable. The more cable fights against DSL the better it is for them,” Entner told Fierce.
It’s difficult to quantify how many cable customers will drop service due to ACP ending, said Dell’Oro analyst Jeff Heynen. However, he anticipates Q2 will be “another difficult quarter” for the largest cable cos in terms of net broadband adds and the ACP churn “could be larger” in the third quarter than in Q2.
Charter’s post-ACP prospects might not be too bad, according to Wolfe Research.
The company has “outperformed” as its recently announced price hikes “reinforce the bull case for positive EBITDA growth,” the firm’s analysts noted, “while early signals about ACP subscriber cancellation rates aren't terrible.”
Consistent broadband average revenue per user (ARPU) is one “bright spot” for cable companies and their investors, Heynen said. Some of that ARPU growth will come from ACP subs dropping service as well as increased broadband prices.
“The big question for me, though, when it comes to ARPU growth, is just how long that can be sustained in the face of increased competition,” Heynen said.
“Competitive fiber offerings tend to be higher-priced, so there is additional growth possible without jeopardizing subscriber relationships,” he added.
Fiber, fixed wireless on the move
AT&T, T-Mobile and Verizon are expected to “varying degrees, lift their [fixed wireless accesss (FWA) and fiber-to-the-home (FTTH)] targets in the months ahead,” said Wolfe Research analysts.
Among the traditional mobile network operators (MNOs), Entner predicts T-Mobile will add the most customers, followed by AT&T and Verizon. Regarding FWA adds, T-Mobile and Verizon should get closer to their 7 and 5 million goals and hit them by the end of the year.
“They will probably go beyond that especially in rural America,” said Entner.
AT&T will likely post “solid” fiber subscriber gains, Heynen noted, and potentially raise its 2025 fiber passings goals. “Though that comes at the cost of lower total net adds due to the losses of DSL customers.”
The operator’s long-term goal is to pass 30 million locations with fiber by the end of 2025. As of Q1, the tally stands at more than 27 million.
Heynen also thinks T-Mobile and Verizon will have FWA subscriber gains this quarter, “some of which will be due to former ACP-based cable customers moving over to these lower-priced FWA services.”
It’s not all doom-and-gloom for cable companies, though, particularly for mobile virtual network operators (MVNOs). Entner estimates the combined cable companies “should add more mobile customers than the traditional MNOs.”
But cable ISPs have their work cut out for them to convince all their internet customers to add a wireless plan, as TD Cowen has noted.
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