New Street Research - Frontier Communications Corporation Class B (FTRCQ) FYBR (Buy, TP: $111, +273%) Frontier Quick Hit: We now know what copper lines are worth!

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New Street Research

Jonathan Chaplin

FYBR (Buy, TP: $111, +273%) Frontier Quick Hit: We now know what copper lines are worth!

: Lumen is selling 6.7MM primarily copper-fed homes to Apollo for $7.5BN (including the assumption of $1.4BN of debt); according to the press release, the transaction was valued at 5.5x 2020 EBITDA (LINK). We published a report articulating the value for fiber lines of $3,873 / homes passed (LINK). This transaction establishes a value for copper lines of $1,119 / home passed (LINK).

04/08/2021 2 EN

Underlying

Frontier Communications Corporation Class B

Frontier Communications is a holding company. Through its subsidiaries, the company is a provider of communications services. The company conducts business with both consumer and commercial customers. For consumer customers, the company provides broadband, video, voice and other services and products. The company delivers these services over a combination of fiber and copper-based networks. The company's commercial customers consist of: small, medium and larger enterprise customers, whereby the company provides services including broadband service, Ethernet service, circuit-based services, SD-WAN, and managed Wi-Fi; and wholesale customers, which buy both voice and data services to supplement their own network infrastructure.

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US35906A3068 Pink OTC Markets United States

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Analysts

Jonathan Chaplin

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New Street Research

FYBR: Cash flow in steady state

Frontier management has set targets for EBITDA of $4BN and operating FCF of $3BN on a footprint with 10MM fiber locations, in steady state. We built a simple model to vet this outcome. Our model arrives at slightly lower EBITDA and UFCF; however, modest cost cuts get us to the target, and cost cuts are likely. In addition to vetting steady-state targets, the model illuminates how value is created in the fiber business. We built it so that you can easily change assumptions and see the impact on value

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The FCC released a survey that included more than 5,000 ACP households today. The FCC repeated the mistake of prior surveys by asking whether households were new to broadband with ACP as opposed to subscribers that are new to broadband with one of the subsidy programs that followed the pandemic (stimulus checks; EBB; ACP). They also asked the important question, which is “what will you do when ACP ends”. Our quick analysis here focuses mostly on the social costs of ACP going away. We will update our forecast for the impact to the operators in due course.

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FYBR: updating capex and funding through 2026

The Company’s new Capex disclosure provides a clear map for cash capex for the fiber project for the remainder of the 10MM location plan, which will take them into 2026. Stronger confidence in the capex trajectory for the next three years lends confidence to the FCF trajectory and funding requirements (we have eliminated a variable). This should make it easier for investors on the sidelines to underwrite the investment case.

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Airtel Africa (Buy, TP: GBP1.5, +42%) Q4 24: Decent, Solid top line but slower EBITDA; positive message on HoldCo cash

Airtel Africa has published a decent set of Q4 results. Top line performance remained strong, service revenue growth in local currency came in above consensus expectations and above our expectations. EBITDA trends slowed (but remained decent given the macro context in Q1) and margins came in 1pp below consensus and us.

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MTN Uganda has reported a good set of Q1 numbers with both service revenue and EBITDA trends accelerating vs. Q3. The company has maintained its medium-term guidance.

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FYBR (Buy, TP: $111, +273%) Frontier Quick Hit: We now know what copper lines are worth!

FYBR: Cash flow in steady state

ACP Part V: FCC releases survey results

FYBR: updating capex and funding through 2026

Airtel Africa (Buy, TP: GBP1.5, +42%) Q4 24: Decent, Solid top line but slower EBITDA; positive message on HoldCo cash

Softbank Corp (Buy, TP: ¥2,500, +33%) Q4 23 Quick Take: Bottom-line beat; mixed near-term guidance impacted by investments into Generative AI

MTN (Buy, TP: ZAR130, +38%) MTN Uganda – Q1 24 Quick Take: Good start to the year

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