Frontier Communications reported solid results for the first quarter of 2018, with revenue in line with analysts’ expectations and subscriber losses improving for the third consecutive quarter.
The company reported revenue of $2.2 billion, down 6.9 percent from a year ago, and adjusted EBITDA of $908 million. Consumer revenue rose $3 million sequentially to $1.13 billion, marking the first increase since Frontier completed its acquisition of Verizon’s wireline operations in California, Texas and Florida in 2016.
Executives pointed to improved product mix and better management of customers coming off promotional pricing as key drivers of the consumer revenue growth.
Frontier lost 42,000 high-speed internet customers in the quarter, better than Wall Street estimates of 51,000 losses. Notably, the company added Fios broadband customers in its California-Texas-Florida business for the first time since April 2016, gaining 5,000 subscribers in Q1. The improved metrics, along with better customer churn of 1.94 percent, pleased analysts.
“Consumer subscriber metrics were a pleasant surprise as continued churn improvement helped reduce the number of broadband losses in the quarter,” Wells Fargo Senior Analyst Jennifer Fritzsche wrote in a note to investors Wednesday.
Jeffries analyst Scott Goldman also said subscriber metrics showed nice signs of improvement, and noted that “it seems momentum could continue.”
“In the first quarter we achieved growth in consumer revenue, reflecting the early results of the substantial initiatives we have underway across the company,” said Dan McCarthy, Frontier’s president and CEO, in a statement. “We are also extremely pleased with the continued improvement in subscriber trends in our California, Texas and Florida (CTF) markets, most notably that we have achieved our first quarter of positive FiOS broadband net additions. We also have begun to improve the trends in the Legacy markets. The entire Frontier team remains focused on continuing to enhance the customer experience, achieving further improvements in churn, maintaining strong cash flow, and strengthening the balance sheet.”
On Frontier’s first-quarter earnings call McCarthy noted that the company has significantly reduced its number of repair tickets, reflecting improvements in resolving issues on customers’ first call.
“This has multiple benefits, most importantly improving customer satisfaction, which reduces the potential for churn, as well as freeing resources so we can respond more rapidly to request for installation of new customers and new services,” McCarthy said, according to a SeekingAlpha transcript.
In the first quarter Frontier achieved about $275 million in annualized cost synergies and said it remains on track to reach its target of $350 million by the end of the second quarter.
CFO Perley McBride noted Frontier is also on track with its Connect America Fund II network deployment commitment to provide coverage to 60 percent of eligible locations by year’s end. Currently Frontier has three states that exceed the required 60 percent threshold. The company now offers broadband to 357,000 locations in CAF II-eligible areas, with a goal to pass 774,000 by the end of 2020.
Frontier also plans to expand its fixed wireless offering in 2018. In 2017 the company deployed fixed wireless in two markets and will roll out the service in another 15 to 20 markets this year, with the goal of covering 30,000 households by the end of the year, according to McBride.
“We’ve had good deployment so far with it [fixed wireless] and good uptake on the product on it as well,” McBride said.
