Altice bets on bundling as profit plunges 87%, broadband subs slide

Altice USA CEO Dennis Mathew teased the launch of a new 8-gig service tier in the second half of 2023, touting the move as one which will allow the operator to reap higher average revenue per user (ARPU) by stepping customers up its speed ladder. But the news was largely overshadowed by tough Q1 results.

Consolidated revenue of $2.29 billion was down 5.3% year on year, with declines across the board in Altice’s Residential (5.6%), Business Services (1.1%) and News and Advertising (13.9%) segments. Net income attributable to Altice USA shareholders plunged 87% to $25.9 million. Capital expenditures jumped nearly 49% year on year to $582.9 million as Altice ramped its fiber expansion.

The operator added 214,000 fiber passings in Q1, compared to just under 146,000 in the year-ago quarter, bringing its total to just under 2.4 million. These helped drive increased gross additions, which, along with more customer migrations from copper to fiber, yielded 38,000 fiber broadband net additions.

During an earnings call, CEO Dennis Mathew touted this figure as “our best fiber net add quarter ever.” He added it expects to add more than 300,000 passings in Q2 and remains on track to reach 900,000 new passings by the end of 2023. Already, he noted fiber is delivering better “customer stickiness” over the first 12 months compared to HFC, higher ARPU and net promoter scores that are nearly 50% higher than HFC.

“We have a lot of opportunity to extract value out of our network upgrades in a way we haven't in the past,” he said.

Mathew also pointed to the operator’s launch of its fixed-mobile-Wi-Fi Optimum Complete bundle this week as a turning point for the company’s strategy which will allow it to focus on building deeper customer relationships that involve multiple services. “Our focus is on driving improved average revenue per account and customer lifetime value rather than individual product ARPU,” he said of its new converged approach.

One way it plans to boost revenue per account is through tier step-ups. It already has a 5-gig fiber product available across 65% of its Eastern footprint and plans to launch the aforementioned 8-gig offering across 100% of its Eastern territory later this year.

Mathew added “I can tell you that we're already significantly advanced in our plan to take this to a 25G PON network that can offer 25-gig symmetrical speeds as soon as the equipment is commercially practicable.” It is also eyeing 50-gig and 100-gig moves via channel bonding and wavelength division multiplexing, he said.

However, Altice continued to bleed non-fiber broadband subs in Q1, leaving it with a net loss of 19,000 broadband customers. That figure was higher than the 12,000 broadband customers it lost in Q1 2022. It ended Q1 with nearly 210,000 fiber customers and nearly 4.3 million total broadband subscribers.

Despite the rocky quarter – and expected seasonal declines in Q2 – analysts at TD Cowen expressed optimism that Altice will be able to turn things around in the back half of the year.

“The heavy investments over past quarters on sales, experience, the network (both DOCSIS in the West and Fiber in the East), pricing/packaging, and now a compelling ‘Optimum Complete’ mobile bundle, should all drive the recovery,” they wrote. “As such, we expect Broadband subscriber losses to taper off by YE.”