Consolidated says government funding opportunities offset high-cost passings

Aug. 10, 2023
Service provider sees public funding as an essential tool to expand its fiber build plan.

As Consolidated moves forward with its fiber broadband plans, the service provider continues to pursue government grant funding to help ease the pain of bringing service to harder-to-reach communities.

Bob Udell, CEO of Consolidated Communications, told investors during its second-quarter earnings call that it is looking at about $110 million of additional broadband government partnership opportunities.

“We continue to pursue grant or infrastructure funding opportunities that align with our plan and can be synchronized with fiber build activity in our communities,” he said. “These government funding opportunities help to offset rural high-cost passings, allowing us to maximize the economies of our builds for complete communities, but this does not include any potential opportunities that come as a part of the $42 billion BEAD program, which is still too early to project.”

He added service provider is “working with the state broadband offices on their respective plans and believe that the BEAD partnership opportunities across our footprint are quite significant.”

As of the end of the second quarter, Consolidated had been awarded about $160 million of broadband partnership and grant funding since 2019 across its markets. “The positive reputation that we've earned from our previous success with public-private partnership and grant awards positions us well to pursue additional funding,” Udell said.

A measured expansion

Consolidated may aggressively pursue new fiber markets, but the service provider emphasized that it will approach the build at a “prudent, measured pace.”

Udell said that because it demonstrated between 2021 and 2022, it could build quickly and efficiently. “Our build method allowed us to expeditiously reach 40% fiber coverage, an important inflection point that supports consistent consumer broadband net adds and revenue growth,” he said. “Our results show that this is exactly what we are doing.”

The company remains focused on driving fiber penetration of its existing base of over 1.1 million fiber passings, which supports funding additional fiber builds.

“Our build strategy in pace is fueled by fiber penetration and government broadband partnerships, all viewed through prudent liquidity management,” Udell said.

Fiber adoption, ARPU jumps.

Consolidated reported that its fiber subscriber base and ARPU continued to rise during the second quarter. Consumer fiber Internet revenue grew 58%, contributing to overall consumer broadband revenue growth of over 8%.

It added over 18,600 fiber net adds, representing a 51% sequential increase in fiber net adds. Moreover, the service provider achieved 7,000 positive consumer broadband net adds as fiber net adds have offset DSL declines.

“This increase in consumer broadband net adds is roughly seven times greater than the prior year and reflects 190% sequential growth from the first quarter,” Udell said.

Amidst the fiber broadband subscriber growth, Consolidated saw consumer broadband fiber ARPU rise 5.1% to $68.29 while fiber churn remained at 1.3%.

“Consumer fiber ARPU rose sequentially as customers continue to take higher speeds of our fiber services,” said Fred Gaffam, CFO of Consolidated. “Our Gig+ speed mix is up 15 percentage points on a year-over-year basis. Included in that mix is a growing interest in our 2-gig product.”

However, the overall consumer results were slightly mixed as total revenue was $112.1 million, down 1.3% compared to the second quarter of 2022. Consumer voice revenue was $31.4 million, down $4.8 million or 13.2%, primarily due to the continued erosion of access lines. Video revenue was $9.4 million, a decline of $2.3 million or 19.7% year-over-year as it continues to deemphasize our linear video.