Consolidated's FairPoint improvement efforts won’t bear fruit until 2H18, says analyst

Consolidated Communications has pledged to make good on where others could not: improve the operations and customer trust in the FairPoint markets it acquired in 2017. But financial analysts say that these efforts won't likely provide a material benefit for the company until the middle of this year. 

These new markets, particularly those in Northern New England that FairPoint itself gained via an acquisition of Verizon’s assets in 2008, initially became mired in turmoil and eventually drove the company to file for bankruptcy protection.

The question now is: Can Consolidated make good on its promise to solidify consumer and business trust?

Jefferies said in a research report that it does not expect these efforts to bear fruit until later this year, no matter how compelling Consolidated’s promises are to enhance consumer and business service penetration and revenues. 

RELATED: Consolidated’s Udell: We see opportunities to improve broadband penetration in FairPoint’s markets

“While we look for commentary on improving trends in FRP markets, we anticipate such initiatives are unlikely to have much impact until 2H18,” Jefferies said.

The financial research firm has reduced its first-quarter revenue estimates by 0.5% to $352.4 million, illustrating a 5.2% decline from the first quarter of last year. These estimates are based on ongoing declines in legacy consumer POTS voice service revenues.

Enhancing broadband

Having just completed the acquisition late last year, one of the key priorities Consolidated has touted is improving broadband penetration in FairPoint’s markets.

Following the rebranding of FairPoint under the Consolidated brand, the service provider announced plans to increase broadband speeds to over 500,000 residents and small businesses across its new Northern New England territory by the end of the year.

Upon completing this build, the service provider said, more than 500,000 residents and small businesses will be able to get speeds two to three times faster than what is currently available in the region today. Nearly 100,000 homes will be able to reach speeds of 1 Gbps via its fiber-to-the-premises (FTTP) network.

Bob Udell, CEO of Consolidated, told investors during the company’s fourth quarter earnings call that it has a lot of running room to enhance broadband availability in the former FairPoint territories.

Udell Consolidated
Bob Udell

“Across FairPoint, we see a little over 15% penetration,” Udell said. “So, we see excellent opportunity for penetration improvements just by that comparison.”

Bulking up business, wholesale

But broadband improvements are only one part of Consolidated’s growth strategy for the FairPoint properties.

By acquiring FairPoint, the service provider became the ninth largest U.S.-based fiber provider, giving it a larger arsenal of assets to serve a larger number of business and wholesale customers with a presence in 24 states.

The service provider is already making good on enhancing business service options in the Northern New England markets.

Some of these services include a series of premise hardware virtualization and DDoS mitigation services, including a virtual customer premises equipment (vCPE) offering it launched in January. This move marks the service provider’s movement toward network functions virtualization (NFV) for business customers. vCPE is available now in Maine, New Hampshire and Vermont.

Additionally, Udell said during the fourth-quarter earnings call that it is “launching our suite of cloud services MPLS and SD-WAN in Northern New England during the second quarter of 2018.”

More recently, the service provider introduced its BusinessOne service bundle aimed at the small to medium business (SMB) market segment.

No less important is the wholesale market. Consolidated’s acquisition of FairPoint also bolstered the service provider’s wholesale capabilities, particularly in the hotly contested wireless backhaul market.

Consolidated is already seeing momentum from this purchase on the wireless backhaul end as it signed a deal to equip 68 new towers in Maine, replacing circuits that were previously supplied by a cable operator. This wireless operator also ordered upgrades to 114 towers in Minnesota and Illinois.

After completing its latest wireless backhaul sale in January, the total number of connected towers Consolidated has under contract had increased to over 2,700.