Frontier Communications’ revenue fell 8.7% in Q2 2022 but that didn’t dampen the spirits of its executive team, who talked up the company’s progress on its fiber build and opportunities to grow its enterprise business. The company also raised its capital expenditure and adjusted EBITDA targets for the full year.
The operator added a total of 8,000 broadband subscribers in the quarter across its consumer and business segments. Fiber net additions totaled 54,000, up from 12,000 in Q2 2021, but were mostly offset by 46,000 copper customer losses. During the operator’s Q2 earnings call, CEO Nick Jeffrey attributed heavier than normal copper losses to an uptick in non-pay churn, which was at lower levels in 2021 due to pandemic restrictions on disconnects. He added voluntary copper churn actually dropped.
Frontier launched a new 2-gig service option in Q1. Jeffrey said demand for speeds of 1 Gbps or above was rising, with 45% to 50% of new customers choosing such offerings. Among its embedded customer base, adoption of gig-plus speeds came in between 10% and 15%, which Jeffrey said leaves plenty of runway for the company to step up customers and increase average revenue per user.
In terms of its ongoing Wave 2 fiber build – through which it aims to reach 6 million new locations to hit a total of 10 million fiber passings – Jeffrey said the operator added 281,000 new passings in the quarter. It still expects to reach its revised target of 1.1 million to 1.2 million new passings by the end of the year.
Frontier previously outlined plans to potentially hit another 5 million locations as part of a Wave 3 build. CFO Scott Beasley said on the call it has determined the Wave 3 opportunity is “worth more than we thought it was.” He added it is now “really clear that that million to two million homes must be built. I mean it is very, very clear and very compelling financially.”
While Frontier expects it can build 1 million to 2 million locations in Wave 3 without subsidies, Beasley noted its ability to reach the remaining 3 million locations that were part of its original plan will depend heavily on outside factors, like its ability to secure government subsidies for the projects.
Eye on enterprise
The operator has focused heavily on turning around its consumer business, but Jeffrey said it’s also seeing green shoots in the small and medium business segment. It also has its eye on future gains in the enterprise and wholesale space, despite the latter being mentioned as a sore spot by larger competitors like AT&T and Verizon.
Business and wholesale revenue of $651 million was down year on year from $698 million. Jeffrey said the segment accounts for about 15% of Frontier’s revenue but has been “undermanaged for many, many years.” He added that’s about to change.
“I think there’s a lot of potential to improve our performance in that segment,” he said. “We’ve got new leadership starting later this month in fact that I think is going to revitalize our efforts in this market and I hope turn it into an engine of growth over time, just as we’ve done in consumer and we’re starting to do in SMB.”
Metrics
Consolidated revenue fell 8.7% to $1.46 billion, while net income came in at $101 million.
Frontier raised its 2022 capital expenditure forecast to $2.5 to $2.6 billion from a previous range of $2.4 to $2.5 billion to accommodate its revised passings target. It also bumped up its adjusted EBITDA forecast by $50 million on the low end, leaving it with a new range of $2.05 billion to $2.15 billion.