Frontier has set an ambitious goal to extend its fiber broadband service to more customers in 2024 while scaling fiber revenues.
The provider plans to build fiber service to over 1 million homes in 2024.
“We plan to build 1.3 million fiber locations again this year,” said Nick Jeffery, president and CEO of Frontier, during its fourth-quarter earnings call. “We plan to add more fiber broadband customers in 2024 than in 2023 while accelerating ARPU growth at or above 3% to 4%. And we plan to improve our customer service and streamline operations to benefit our customers and our bottom line.”
Jeffery said Frontier will scale fiber sales by extending service to more locations, benefiting the company. “We plan to accelerate fiber revenue growth, which will drive overall company revenue growth in 2024,” Jeffery said.
Scaling fiber penetration
During the fourth quarter, Frontier passed 333,000 new locations with fiber, exceeding its goal of 1.3 million passings in 2023. It also added 84,000 fiber broadband customers.
The service provider ended 2023 with 2 million fiber broadband customers. Frontier’s fiber broadband customers now represent two-thirds of its total customer base.
Scott Beasley, CFO of Frontier, said the 2 million figure is a significant milestone, representing a large portion of the company’s broadband growth.
"Our base fiber penetration now sits at 44.5%, close to our target of 45%,” he said. “All cohorts perform at or above our target ranges at 12 and 24 months in expansion markets.”
Taking it further, Jeffery is confident that Frontier could extend penetration beyond the 45% market.
“We've always said at least 45%, but that’s just the kind of mathematically right outcome in a 2-player market where some of the markets don't take service at all, and the rest is divided equally amongst the remaining two players,” he said, “We have many markets and many cities where our penetration in our base markets is already way higher than 45%.”
Jeffery added that even in markets where Frontier faces cable and fixed wireless access (FWA) competition, it has reached 45% penetration and higher.
“Our growing penetration in our base markets where we faced long-established, well-entrenched cable competitors,” he said. “And yet, we are still able to grow our penetration by over four percentage points in the last few years up to very, very close now to our ambition of 45% on average and higher in some other places is a great and powerful indicator for what we believe is possible to achieve in the expansion markets where we're building fiber.”
Ultimately, Frontier’s goal is to get fiber to 10 million locations.
As of the end of the year, Frontier had reached 6.5 million locations with fiber. “Easy math puts us 65% of the way towards our goal of building 10 million fiber locations,” Jeffrey said.
Fiber revenues, ARPU rise
Frontier’s consumer fiber revenue of $484 million rose 11.0% year-over-year as growth in broadband was partly offset by declines in video, voice, and other services.
Driven by growth in fiber broadband customers and ARPU, consumer fiber broadband revenue of $354 million increased 25.1% year-over-year.
Frontier’s consumer fiber broadband ARPU rose 4.8% year-over-year to $64.16 due to increased customer in-take ARPU and annual price increases.
“We grew our customer base while also growing ARPU by 5% versus Q4 of 2022,” Beasley said. “We implemented numerous initiatives early in 2023 to drive ARPU growth. We offered faster speed tiers, adjusted pricing, and started charging for value-added services.”
Higher speed offerings appear to resonate with Frontier’s consumer fiber broadband customers. Beasley said, "60% of our new customers are taking speeds of 1 gig or faster, and roughly 45% of customers purchased at least one value-added service.”
Consumer fiber broadband churn also improved to 1.20% in the quarter. That's down 12 basis points from the prior year. Last, we achieved double our initial cost savings target at the end of 2023, surpassing $500 million of savings for the program.
The service provider also saw gains across fiber customers and revenue, while churn declined during the quarter.
Consumer fiber broadband customer net additions of 81,000 resulted in consumer fiber broadband customer growth of 19.2% year-over-year. In comparison, fiber broadband customer churn of 1.20% decreased from 1.32% in the fourth quarter of 2022.
“Our success gaining customers is translating into fiber revenue growth,” said Beasley. “We ended the year on a high note with strong fiber revenue growth, driven by our consumer performance. Consumer fiber revenue grew 11% in Q4, and we are confident that this trend will continue accelerating in 2024.”
Beasley added that Frontier’s fiber build-out and customer acquisition efforts are helping the provider overcome ongoing losses in its legacy copper business.
“For the second quarter in a row, consumer fiber revenue growth offset copper declines, resulting in total consumer revenue growth of 1%,” he said. “This was a key inflection point for us two quarters ago as the lift from consumer fiber broadband finally began more than to offset the declines of legacy video and voice products.”
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