Frontier could see broadband subscriber improvement in Q3, says analyst

Frontier Communications (Frontier Communications)
Frontier has been seeing some signs of positive subscriber trends in its Fios markets, according to Morgan Stanley.

After losing an additional 101,000 subscribers due to higher-than-expected legacy DSL losses, Frontier has a high hurdle to overcome in the broadband race when it reports its third-quarter results next week.

However, analysts say the service provider’s steps to stem broadband losses via a series of new speeds Fios self-installation could pay off in the third quarter.

Morgan Stanley noted Frontier has been seeing some signs of positive subscriber trends in its Fios markets.

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“Frontier did notice improved churn in FiOS markets in 2Q17, which they continued to see in July and August,” Morgan Stanley said in a research note.

Frontier's McCarthy Image: Frontier
Dan McCarthy

Dan McCarthy, CEO of Frontier, told investors during its second-quarter call that “we're expecting to see continued voluntary churn reduction, as well as an uptick in gross adds, and the combination of the two is where we see improvements in net as we get into this quarter.”

Morgan Stanley added that it “modeled a slight improvement to broadband subscriber trends in 2H17 (-75k/-50k in 3Q17/4Q17 vs -100k/-91k in 3Q16/4Q16) and 2018 (+40k vs -333k in 2017).”

A key metric to focus on for Frontier will be California, Texas, and Florida (CTF) market churn. In the second quarter, the service provider still lost 23,000 DSL and 44,000 Fios subscribers in CTF.

However, Frontier and the rest of its ILEC peers such as AT&T, CenturyLink and Verizon will still be challenged by cable operators like Comcast, which has been aggressively rolling out 1 Gbps services over their existing HFC networks.

Thus far, the broadband subscriber performance of AT&T and Verizon hasn’t been varied. While AT&T and Verizon continued to grow Fios and IP-based broadband, the two providers continued to bleed legacy DSL subscribers in the quarter.

“We'd note that the Bells reported soft wireline subscriber trends, with Verizon losing 18k video subs and 10k broadband subs, while AT&T lost +385k video subs (though added +296k OTT DirecTV now subs) and added +29k broadband subs (+125k IP, -96k DSL),” Morgan Stanley said.