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Frontier CFO Says No Need for Mobile Now, Fiber Returns High

Frontier Communications
(Image credit: Frontier Communications)

 

Frontier Communications chief financial officer Scott Beasley said the mid-sized  carrier does not expect to introduce a mobile product in the near future, mainly because returns on its fiber-based broadband service are so high.

Frontier emerged from bankruptcy protection about a year ago with a goal to upgrade its network and vastly improve its customer experience. The company built out about 640,000 homes to fiber in 2020, and expects to pass another 1.1 million to 1.2 million homes with fiber this year -- up 20% from the original forecast. The plan is to pass 10 million households by the end of 2025.

At the Credit Suisse Communications conference Tuesday, Beasley said the build has been progressing well, adding that the company also is exceeding expectations for its goal of removing about $250 million in costs annually out of the business. 

“We’re about a year ahead of that plan. We expect to meet the $250 [million] a year ahead of schedule, plus add to it,” Beasley said.  

But one thing the company will not be focusing on is launching a mobile product, something overbuilder WideOpenWest  did earlier last month. 

At the Credit Suisse conference, Beasley said mobile has had no impact on Frontier’s fiber success, adding that at this point, the returns on the fiber product are so high, it doesn’t make sense to shift resources at the moment toward a mobile product.

“The demand for fiber is clear, we’ve had three successive quarters of record net adds without a wireless product,” Beasley said. “Consumers are choosing the best connectivity product separately from the potential to bundle it with wireless. Secondly, we haven’t done it yet because the returns on capital from building fiber are so strong for us that we’ve chosen to stay focused, we’re going to allocate capital to our fiber build. The unlevered IRs are in the mid-to-high teens there.” 

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But the CFO added that if consumer behavior does change, Frontier has the resources and the leadership -- Frontier chairman John Stratton and CEO Nick Jeffery have extensive experience in the wireless business -- to quickly launch a mobile product. 

“If we decided to do that we could do it quickly, we could do it well,” Beasley added. “But it hasn’t been a part of the core strategy this far.”

Also: It’s Time to Take Frontier Communications’ Fiber Plans Seriously 

In April, Frontier made 2 Gigabit per second data speeds available across its entire footprint -- making it the first carrier to do so, according to Beasley -- and the CFO said the company has been “very pleasantly surprised with the uptake.” While he conceded that not everyone needs that level of bandwidth -- “power users” like gamers and those who need to download and upload massive files are the main customers -- that may change sooner than you think. 

Beasley estimated that data consumption has risen between 30% and 40% annually over the past few years, with the average Frontier fiber customer consuming almost 1 Terabyte per month of data, up 30% from pre-pandemic levels. Also, as the number of devices connected to the network rises -- he estimated that the average household in Frontier’s footprint has 22 devices -- so will the need for bandwidth.

“We think demand is there now for a portion of our customer base, and we think it’s going to  continue to rise as data consumption rises,” Beasley said. ■ 

Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.