Frontier boosts fiber target to 10M locations, eyes 10-gig service

Frontier Communications ramped its fiber expansion plan, aiming to reach a total of 10 million locations by the end of 2025 rather than its original target of 6 million.

The operator also plans to rollout symmetrical 2 Gbps service in Q1 2022. On a call with investors, Frontier president and CEO Nick Jeffery said the move will increase its performance beyond cable's reach to a level “where only fiber can compete.” He added it is “already in advanced planning to launch a 5 to 10 gigabit per second ultra-high speed offering,” though did not provide a timeline for doing so.

Frontier is now aiming to deploy fiber to 600,000 new locations in 2021, up from a previous goal of 495,000, which it said will raise its total number of locations served to 4 million by the end of the year. After adding 100,000 new locations in Q1, it passed an additional 157,000 in Q2, leaving 343,000 to go in the back half of the year. Jeffery noted the Q2 tally of passings was roughly twice the number achieved through its build for the full year 2020.

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The end of 2021 will mark the close of what Frontier referred to as Wave 1 of its fiber build, with Wave 2 set to add the additional 6 million passings required to take it to 10 million. Chief Network Officer Veronica Bloodworth said on the call it expects to accelerate the pace of deployments in Wave 2, hitting 1 million new locations in 2022, 1.6 million in 2023, and 1.7 million or more each in 2024 and 2025. To achieve this, she noted it has already begun adding more labor vendors and is actively engaged with government entities and utilities to facilitate permitting and construction.

Bloodworth added the path to 10 Gbps service is clear, stating that since 2019 the company has been “deploying PON equipment that is capable of upgrading to all next-generation PON technologies, including NG-PON2, 25-gig PON and 50-gig PON, with simply an optics change.” “This ensures a rapid time to market with very minimal investment,” she said.

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Frontier CFO Scott Beasley said the operator’s fiber build plan is “fully funded” through early 2023 with cash on hand and accessible debt capacity. He added that for the balance of 2023 and beyond it has “access to multiple sources of capital” to fuel the remainder of the build.

Once its Wave 2 deployment matures, the operator said it expects to have a “steady state” customer base of 4.5 million fiber subscribers and $4 billion in adjusted EBITDA.

Beyond Wave 2, Beasley said Frontier is assessing its options for a Wave 3 opportunity covering 5 million locations in its copper footprint. It is weighing various options for Wave 3 locations, including upgrading them to fiber or potentially selling them, but Beasley said much will depend on how much government funding is ultimately available for broadband investments.

Q2 results

The second quarter marked Frontier’s first earnings period since it emerged from bankruptcy in April. In its earnings report, the company used non-GAAP metrics to cover the full quarter.

Frontier posted net income of $4.58 billion, up from a net loss of $181 million in the year-ago quarter, with this turnaround largely attributed to a $4.2 billion benefit from its reorganization. Consolidated revenue of $1.62 billion was down nearly 8% due to a fall in copper subscribers and wholesale revenue.

Fiber broadband revenue of $268 million was up 13.6% year-on-year, thanks to subscriber gains and higher average revenue per user. The operator added 12,000 consumer fiber subscribers in Q2, up from 8,000 in the year-ago quarter.

Capital expenditures for 2021 are now expected to total $1.8 billion, up from a previous forecast of $1.5 billion, primarily due to the accelerated deployment plan.