Frontier says $2.1B boost makes its fiber goal achievable

Frontier Communications CEO Nick Jeffery said its recent fiber securitization will give the company funding through the end of 2025 and a “very clear path” to hit 10 million fiber passings by that year.

In August, Frontier closed its fiber securitization notes offering as part of a $2.1 billion financing, a significant jump from its initial goal of raising $1.05 billion. Frontier is the first publicly traded company in the U.S. to secure funds backed by fiber-to-the-home (FTTH) assets.

“We're very, very proud to be the first public company to do a fiber securitization,” said Jeffery at this week’s Goldman Sachs Communacopia + Technology Conference. According to him, Frontier only securitized “about 11% of [its] built fiber network” to get to $2.1 billion.

For the transaction, the company created a new entity separate from its main operations that wouldn’t be affected if the parent company were to go bankrupt. Frontier said the notes, which qualify as green bonds, will be backed by some of its fiber assets and associated customer contracts in the Dallas area. 

The securitization gives Frontier “a very attractive pool of financing into the future, firstly, to complete our 10 million build, but then maybe to do other things beyond that as well,” Jeffery said. “I'm very encouraged by the progress we're making there.”

Frontier has said it plans to reach 1.3 million fiber passings in 2023 with a focus on converting existing copper customers to fiber rather than decommissioning copper. The company so far hasn’t disclosed any cable lead findings in its network related to the Wall Street Journal report, which found at least 2,000 old telco cables in the U.S. contain degraded lead.

At a pace of about 1.3 million additions per year, the operator will be on track to meet its 10 million by 2025 target. Frontier has said its targeting 15 to 20% penetration within 12 months of deploying new fiber and 25 to 30% within two years of deployment. Eventually, “the terminal penetration objective" Frontier has set for its overall network build is 45%, Jeffery said.

Jeffery and his executive team took over the company just three years ago with an ambitious plan to transform what was then a company in bankruptcy with a legacy telecom heritage and DSL network into a fiber-based broadband provider.

“We had to kind of kickstart this company back into growth with a brand that was tarnished, to be polite. And a company that wasn't as operationally excellent as I'd like it to be,” said Jeffery. Since then, Frontier has expanded its fiber network by about 80% and added 40% to its customer base.

Jeffery attributed this to several factors, among them Frontier’s shift to a converged service bundles strategy, which many cable and telco operators have also done to stay competitive in the crowded broadband market (ie. Comcast’s mobile/home broadband bundle or Charter’s Spectrum One).

Additionally, Frontier’s net promoter score is at an “all time high,” Jeffery said. This year, a million fewer people have called the company’s call centers, despite its customer base growing.

At this week’s event Jeffery reiterated the company’s forward-looking focus on its business and wholesale unit, which was a bright spot in its second quarter results after seeing positive year-on-year revenue growth for the first time in six years. Frontier’s business and wholesale growth is specifically focused on small and midsize businesses (SMBs).

While the company’s Q2 business and wholesale revenue was up, consumer revenue of $775 million dipped 2% year-on-year. Jeffery said the second quarter typically sees “some seasonality headwinds, lower move activity, lower churn activity,” adding, “I think it's fair to say we’ll see some of that carried into Q3.”