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Frontier CFO Scott Beasley spoke at an investor conference this week about the company's ARPU and strategic review
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He thinks Frontier can grow ARPU "at least 3 to 4%" per year
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As Frontier inches closer to its 10 million fiber passings target, it's "looking ahead to see what's next"
Once-struggling Frontier may have turned a corner. To quote New Street Research's Jonathan Chaplin, the company "has developed the formula for alchemy - in this case, converting copper to gold."
If you’ve been following Frontier at all in the past year, you’ll know average revenue per user (ARPU) has mainly been the name of the operator’s game. And in Q4, Frontier’s consumer fiber broadband ARPU rose nearly 5% YoY to $64.16.
At the Raymond James investor conference Monday, CFO Scott Beasley broke down the company’s ARPU growth into “three main buckets.”
The first bucket is annual base price increases, he said. “Customers understand the need for providers to pass through price increases every year,” given inflation. Also, new customers are “increasingly taking” higher speeds, as he noted 60% of Frontier’s customers order speeds of 1 Gbps or above. And the third bucket is value-added services like whole home Wi-Fi and streaming services.
“The three of those combined give us a lot of confidence that we’ll be able to grow ARPU at least 3 to 4% a year,” Beasley added.
Speaking of ways to grow revenue, Frontier in February formally announced it’s undertaking a strategic review to explore opportunities to “create additional value” for shareholders.
According to Beasley, “there’s really nothing new to report.” But he said now Frontier has “a clear line of sight” to pass 10 million locations with fiber (thanks to the $2.1 billion fiber securitization it closed last summer), the company’s “looking ahead to see what’s next.”
That means Frontier is thinking about things like joint ventures, strategic partnerships and “optimizing [its] operational financing strategy.”
“We’re building roughly 3,500 passings per day, so every day we’re creeping closer to our 10 million goal,” said Beasley. “But we have said our aspiration is to go beyond 10 million.”
“And to go beyond [that], we might look to partner with people who would provide capital, whether that’s for additional edge outs or builds outside our territory, whether that’s BEAD funding, whether that’s incremental copper conversions.”
Are JVs cool again?
Other operators have launched JVs to extend fiber outside their footprint. Probably the most notable one is AT&T and BlackRock’s Gigapower, which is building a wholesale open access fiber network in five states.
There’s also Clearwave Fiber, a JV founded by Cable One and a handful of private equity firms. It’s targeting fiber rollouts to half a million rural locations by 2027.
While Frontier isn’t divulging any details about what exactly will come out of the strategic review, analysts at New Street Research have said there’s a lot to consider, “everything from how best to monetize markets that will never get fiber to how best to attack and finance the BEAD opportunity.”
“The company can pursue some of these opportunities organically, but others will require partnerships, JVs, and even acquisitions,” analysts wrote in a note to investors last month.
The good news for Frontier? “It is great to be sitting on an asset with a ton of unrealized value and many ways to unlock it.”