Frontier Q3 broadband subs dip 99K on call center transition, tightened credit policies

Frontier’s efforts to tighten its credit policies and establish a call and support center in the United States resulted in the telco losing over 99,000 customers during the quarter.

The telco ended the quarter with a total of 4.4 million broadband subscribers, down from 4.5 million in the second quarter. Frontier said that the broadband results during the third quarter reflected the initiation of customer acquisition activities within the quarter from the California, Texas and Florida (CTF) markets it acquired from Verizon, but anticipates improved customer additions in the fourth quarter.

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Dan McCarthy, CEO of Frontier, told investors during its third quarter call that while subscriber additions in the CTF markets it acquired from Verizon rose sequentially in the third quarter, the results did not meet the telco’s targets.

“This slower rate resulted because we began marketing during the seasonally slowest sales period, we on-shored our customer contact centers, which initially impacted our principal sales channel negatively and we resumed customer collection processes,” McCarthy said. “The last point began in the final month of the quarter and will have an impact in Q4 as well.”

McCarthy added that he anticipates “legacy broadband net additions will be positive again in Q4, but it is too early to determine if they will be back to historic levels.”

Additionally, the service provider hired 4,000 call center representatives. At the time that Frontier completed its acquisition of Verizon, the telco had been supporting those customers out of a call center in the Philippines. As a result, Frontier said it was unable to connect customers to its client’s service reps, causing delays in service activation and repairs in the CTF regions.

McCarthy said that while hiring these representatives will allow Frontier to be more responsive to its customers, the telco is still going through the process of training them and getting them familiar with its systems.

“Probably the single biggest improvement, though, was getting to the point where 4,000 new reps that came into the company as we on-shored, were selling effectively and efficiently using the tools,” McCarthy said. “You can't fully train everyone in that first month or two months. And we made a trade-off that accelerated that to improve the customer experience from an offshore perspective to onshore.” 

Despite the near-term slowdown in broadband subscribers, Frontier is making progress upgrading customers in its copper-only broadband markets in its legacy and CTF markets to higher speeds. Specifically, the service provider has upgraded 800,000 addressable households to 50 Mbps or higher speeds, with plans to complete an additional 300,000 CTF upgrades by the first quarter of 2017.

“We have begun the process of upgrading broadband capabilities in non-FiOS areas of CTF,” McCarthy said. “In fact, we'll have the first 300,000 households upgraded over the next 90 days and open for sale.”

Prior to making these upgrades, subscribers in the Verizon CTF territories could only get access to 6 Mbps speeds served by an earlier generation of broadband infrastructure that had not been upgraded.

“As we changed the product availability in some of the copper markets for the new states, we go from essentially a 6 meg product that hasn't been opened for sale in years to a 50-plus-meg product that's very competitive in the marketplace and offers customers a choice that they never had before,” McCarthy said.

Broadband wasn’t the only pain point for Frontier as the telco reported a decline in video subscribers. The service provider lost 92,000 video subscribers, ending the quarter with a total of 1.53 million total customers.

To improve the video subscriber trends, McCarthy said Frontier is expanding its Vantage product footprint and plans to re-launch its legacy FiOS areas “following the successful conversion of the base to the new and improved Interactive Media Guide and the integration of our improved VOD library.”

Frontier also announced customer-focused organizational structure and the creation of Commercial and Consumer business units, resulting in enhanced focus on the commercial segment and more efficient capital allocation. Current regional support functions including Engineering, Finance, Human Resources, Communications and Marketing are being centralized to achieve improved operational performance as well as expense reductions. As a result of this change, Frontier is going to lay off 1,000 employees.

McCarthy said that the new structure will not only produce “cost savings,” but give Frontier, which has traditionally been a consumer-oriented telco, an “enhanced focus on commercial.”

From an overall financial perspective, Frontier reported total revenue of $2.52 billion and operating income of $264 million, down sequentially from $2.61 billion in the second quarter.