Frontier adds 26,800 new broadband subs in Q3, revenue declines to $1.18B

Frontier Communications (Nasdaq: FTR) added nearly 26,800 new broadband customers in Q3 2013, illustrating the third consecutive quarter of subscriber growth.

Over the past nine months, Frontier added about 84,500 new net broadband customers. As of the end of September, the telco had a total of 1.83 million broadband customers.

In addition to broadband, Frontier added 10,500 net video subscribers during the quarter, ending the period with a total of 377,900 customers. While overall customer revenue remained flat year-over-year at $1.05 billion, total residential revenue rose 0.1 percent sequentially to $506.1 million.

From a customer addition standpoint, Frontier had about 2.82 million residential customers and 274,700 business customers. The service provider said it improved the rate of decline in residential customers by 56 percent vs. 2012, losing about 20,700 customers as compared to 16,300 customers in the three months ended June 30, 2013 and 46,700 customers in the three months ended Sept. 30, 2012.

It attributes the increase in residential customer losses during the third quarter to seasonality and plan migration. At the same time, average monthly residential revenue per customer (ARPC) rose 1 percent sequentially to $59.56.

Maggie Wilderotter, chairman and CEO of Frontier, said during the earnings call that Q3 2013 represented one of the "strongest quarter-over-quarter performances since 2010" for broadband.

"We truly believe that simplicity and consistency of our offers in the marketplace coupled with the right channel incentives are the drivers of this strong uptake," Wilderotter said. "Another contributing factor is Frontier Secure. About a quarter of our residential broadband base already subscribes to FrontierSecure and we expect this to continue to trend higher, as customers rely more on broadband for their daily activity, and online extension and interaction, securing their experience becomes even more important to them."

In the business segment, Frontier said it improved the rate of business customer declines by 31 percent vs. last year, losing approximately 3,500 customers as compared to 2,900 customers in the three months ended June 30, 2013 and 5,100 customers in the three months ending Sept. 30, 2012. Like the consumer segment, average monthly business revenue per customer rose 1 percent to $656.06.

Total business revenue declined 0.4 percent to $544 million due to an expected decline in wireless backhaul revenue.

One area of growth in the business segment was Ethernet services. The telco's Gigabit Ethernet (GigE) service for medium and larger business customers is now available in 86 percent of its central offices.

Daniel McCarthy, president and chief operating officer, said during the earnings call that "the next phase in our Ethernet build will be to add capability for premium Ethernet services, which will also enable us to charge differently for higher tiers and services."

The decline in wireless backhaul revenue came as it continued to migrate customers off of its copper-based TDM platforms to fiber-based Ethernet. By the end of the year, the telco plans to build fiber to 308 additional towers.

McCarthy said they had "factored a $25 million to $35 million decline in wireless backhaul revenues into our 2015 guidance," adding that they "anticipate further declines in wireless backhaul revenues through the first half of 2014 before we see backhaul revenue stabilization."

Overall company revenue was $1.18 billion, down 0.4 percent sequentially from $1.19 billion in Q2 2013. As seen in previous quarters, Frontier attributed the decline to lower switched access, voice and non-switched access revenue, which was partially offset by the increase in data services revenue and subsidy revenue.

For the full year of 2013, the service provider has retained its current guidance for capex and free cash flow of $625 million to $675 million and $825 million to $925 million, respectively.

Shares of Frontier were listed at $4.48 at the end of trading Tuesday on the Nasdaq stock exchange.

- see the earnings release
- and the earnings transcript (sub req.)

Earnings summary: Wireline telecom earnings in the third quarter of 2013

Related articles:
Frontier broadband subscribers climb to 1.8M as business customer churn slows
Frontier hit hard as copper thieves get bold, desperate in Washington
Frontier, FairPoint, others find new wholesale life with wireless backhaul
Frontier selects ETI's BSS/OSS software to support its FTTH network