Frontier thinks it can beat its target of 1M fiber passings in 2022

Frontier Communications expects to surpass one million new fiber passings by the end of 2022 – hitting 100,000 to 200,000 additional locations – according to CFO Scott Beasley.

The accelerated buildout is mainly due to Frontier’s recent move to boost its liquidity to a total of $4 billion, meaning the company has plenty of cash on hand until mid-2024. Beasley outlined several advantages to the capital raise during MoffettNathanson’s 9th Annual Media & Communications Summit.

“First, it sends a strong signal to overbuilders to build somewhere else if they thought we weren’t going to build [fiber]. Secondly, it sends a strong vote of confidence to our supply chain partners in what is largely an allocation environment. Third, it allows us to accelerate on our already ambitious plan we laid out,” he said.

The 1 million passings benchmark was initially noted by CEO Nick Jeffery during the company’s Q1 earnings call earlier this month. Beasley added the expanded goal of 1.2 million homes is still within Frontier’s current cost envelope.

Further intending to expand fiber buildout, Beasley said Frontier has a “steep acceleration” built in for next year – a goal of 1.6 million homes passed. Given the capital raise, he said Frontier will “definitely” take the opportunity to reach that number.

Despite persisting supply-chain issues, Beasley noted Frontier has a “huge advantage” with suppliers, as the operator touts the second largest fiber build in the country. He said Frontier performed “better than expected” on passing costs so far, as construction efficiency savings have helped offset costs in a challenging macro environment.

“We’re also seeing significant capacity upgrades from the supply chain,” said Beasley, pointing out labor is flowing into the fiber-to-the-home market. “Those may not help this year but definitely should help next year.”

As the fiber market stabilizes, Beasley said Frontier doesn’t see churn rates as an impediment to the operator’s penetration rates.

“We’ve seen record fiber net adds even in a low move environment,” he said. “As the move environment normalizes to pre-pandemic levels, that should be a net positive for us. Because we’re going in with a far superior product and far superior network.”

Beasley went on to say as Frontier continues its focus on fiber, the operator still has a “long way to go in digitizing the [customer] experience,” which includes improving self-serve capabilities on Frontier’s website and providing more flexible billing options. He noted about one-third of Frontier’s customers submit paper checks to pay their bills and the company doesn’t have sufficient optical character recognition (OCR) technology to scan the checks.

But Beasley mentioned Frontier has also made “significant movements” to enhance its digital approach. Frontier recently relaunched its website – with an updated logo and an easier navigation panel – and Beasley said to expect similar improvements within the next 6-12 months.

Concerning average revenue per user (ARPU), Beasley said Frontier faced “some headwinds” with customers using autopay and gift card payment options. But the operator expects to offset that with “normal price increases.”

“As our costs go up, we pass them on to customers in some degree,” he said, adding Frontier customers are also increasingly upgrading their speed plans. About half of Frontier’s customer base is choosing a service tier of one-gig or above, Beasley noted, and that is a “healthy tailwind of ARPU.”

Regarding fixed wireless access (FWA), Beasley echoed Jeffery’s comments from the earnings call, saying that while fixed wireless may impact rural and “ultra-niche” markets where fiber isn’t readily available, it’s a “much less compelling” option compared to fiber. He pointed out average usage of Frontier’s fiber network is already approaching one terabyte of data usage per month and that fixed wireless networks “aren’t architected at all for that level of throughput.”