Frontier's fiscal year flies high on fiber ride

  • For the first time in more than a decade, Frontier achieved full year EBITDA growth

  • Overall growth was largely driven by strong fiber revenue and expansion

  • CEO Nick Jeffery called Frontier's growth "sustainable," with even bigger fiber expansion plans slotted for 2024

Frontier's prophesy that 2023 would mark its return to growth has come true. For the first time in more than a decade, the company achieved full year EBITDA growth, which was underpinned by strong fiber revenue and expansion.  

After Frontier reported Q4 earnings, a note from New Street Research tipped EBITDA growth to accelerate from 4% at the end of 2023 to nearly 7% by the end of 2024.

Fiber revenue grew 20% in 2023, up from 13% in 2022 and 12% in 2021. In the fourth quarter alone, Frontier added 84,000 fiber broadband customers and passed 333,000 new fiber locations, exceeding its goal of 1.3 million fiber passings for the full year.

“We've created a model for driving sustainable growth,” CEO Nick Jeffery said during earnings. That model revolves around putting more fiber in the ground, connecting more customers and delivering higher average revenue per user (ARPU).

Frontier ended the year with 6.5 million fiber passings, as it continued to scale its build to reach an ultimate goal of 10 million locations. It increased its fiber footprint by 25% last year, and doubled its size since it started expansion efforts back in 2020.

For the second quarter in a row, consumer fiber revenue growth offset copper declines (48,000 subscriber losses) resulting in total consumer revenue growth of 1%. New Street Research analyst Jonathan Chaplin said the value that Frontier is creating by converting copper to fiber "will become more visible in reported metrics in 2024."

Base fiber penetration now sits at 44.5%, close to Frontier's target of 45%.

According to Jeffery, its fiber customer count is now at 2 million, a noteworthy milestone as fiber broadband customers now represent two-thirds of its total customer base.

A strategy for ‘sustainable’ growth

Frontier's success last year might have a few people eating their words. The quarterly report represented “an earnings surprise of 275%," according to Zacks Equity Research. A quarter ago, analysts expected the company would post a loss of $0.06 per share, but it actually saw earnings of $0.05.

Frontier posted revenues of $1.43 billion for the quarter ended in December. For the full fiscal year 2023, the company reported profit of $29 million.

To keep growth going, Frontier will carry on with its current strategy, said Jeffery: “build fiber, sell fiber, improve customer service for all customers and increase our operational efficiency.”

Among its customer service efforts, Frontier invested in digital self-service tools like a new app and artificial intelligence (AI) chatbot. The outcome of those efforts? Churn is down (1.2%) and net promoter scores are up.

Frontier plans to build 1.3 million fiber locations again this year, and to add more fiber broadband customers in 2024 than it did in 2023, all while accelerating ARPU growth at or above 3% to 4%.

Jeffery said the company will look to accelerate fiber revenue growth, while top line growth could come from an acceleration in consumer revenue with Business and Wholesale remaining "relatively stable." 

Whew. Did you catch all that? It's a tall order, and we'll be watching to see if Frontier can deliver.