A new Frontier was born today as the company officially emerged from bankruptcy and hosted its first quarterly earnings conference call. A clear message emerged on the call, with Frontier executives outlining a path forward that aims to make Frontier the largest ‘pure play’ fiber broadband provider in the U.S.
By pure play, I assume Frontier means you can’t count AT&T and Verizon, both of whom have north of 5 million fiber subscribers. But they both have huge wireless operations, and my guess is by Frontier’s definition, this rules them out as ‘pure play’ fiber companies. By this measure, with 1.3 million existing Frontier fiber subscribers, it probably has already achieved the goal of largest U.S. ‘pure play’ fiber provider.
Its closest competitor in terms of total fiber subscribers probably is Lumen/CenturyLink, which doesn’t reveal actual fiber broadband subscriber counts, but has over 4 million total broadband subscribers. TDS is probably third, with 307K fiber broadband subscribers (as of the end of 2020).
All In on Fiber
Frontier is all in on fiber, a significantly repeated theme on today’s call. Part of the strategy is to convert many of its existing DSL customers to fiber. Frontier currently has 11.8 million locations that can be served by DSL, and over 1.5 million DSL customers.
Frontier is also expanding its fiber footprint. It added 200K new fiber passings in 2020 and intends to add an additional 600K by the end of 2021. Frontier fiber penetration is currently 41.5%, with a goal to achieve 50%.
Ultimately, Frontier sees the total fiber opportunity for the company to be over 13 million locations passed. The company is already building towards an additional 3.4 million locations and has identified 6.7 million as its ‘evaluation opportunity.’ The company is planning an August investor day to further outline its fiber strategy.
“The next tier of opportunity and the speed with which we’ll accomplish the whole of our builds is currently being evaluated in a strategic review,” said John Stratton, executive chairman of Frontier, on today’s call. “We recognize time to market is an absolutely critical success factor.”
If Frontier achieves 50% penetration of fiber, it believes it creates an enterprise value of $18 billion for the company. It claims an enterprise value of $15 billion today. Frontier cites its 7 consecutive quarters of net fiber broadband adds as evidence that this fiber strategy is working. It reported adding 11K fiber subscribers in 1Q 2021.
Hard Work Ahead
Frontier has a lot of work ahead of it. Its fiber strategy makes logical sense. But it has a legacy of poor execution and lackluster customer service to overcome. It’s a reality its new CEO Nick Jeffery acknowledges.
“I joined Frontier well aware of the issues that the company has faced over time and with a sense of real urgency to bring about change to help improve execution and make smart investments of the future,” he said.
Jeffery is tasked with an ambitious plan. He’s done this before. Turned a communications company around that is, at Vodaphone in the U.K., an experience both he and Stratton noted on today’s call. He struck a tone of confidence and noted he’s assembling a team to accomplish his goals, including recruiting Veronica Bloodworth away from AT&T to be Frontier’s Chief Network Officer. Bloodworth oversaw AT&T’s fiber expansion as SVP of Construction and Engineering.
“Frontier’s purpose is to be a leader in building gigabit America,” said Jeffery on today’s call. “We will connect more rural areas, upgrade our lower network speeds, make quality internet more accessible, and play our role in providing the U.S. with the digital infrastructure it needs to succeed over the coming years.”