reports
- Jonathan Chaplin
Frontier Model Update
We are updating our model mainly for the updated thoughts on the timing of ACP that we covered in this report. The changes to subscriber estimates are minor as Frontier’s exposure to ACP is small. We are above printed consensus on fiber net adds and EBITDA for the quarter and for the year. The other changes to estimates are minor. Our long-term thesis remains unchanged. Price target is $52.
- Jonathan Chaplin
1Q24 Wireless Trends
We have updated NPS and industry trends for the latest quarter of data. Customer growth has settled in a tight range of 2%+. Revenue per customer accelerated, driving an uptick in service revenue and EBITDA growth for the group. NPS trends continue to improve for the wireless industry, with Dish now leading the pack. We run through thoughts on both trends in this note.
- Jonathan Chaplin
Comcast Model Update
We are updating our model mainly for the updated thoughts on the timing of ACP that we covered in this report. The ACP impact will be lower in 2Q24 but higher in 3Q24 and 4Q24 than we modelled previously. We are now misaligned with consensus which expects losses to peak in 2Q24 and improve in 3Q24 (we are above consensus for adds in 2Q24 but well below in 3Q24).
- Jonathan Chaplin
FYBR: creating value through structural separation
We have argued that Frontier should separate Wave 3 markets into a JV with a financial partner, similar to AT&T’s Gigapower. This will accelerate the time to FCF generation, while allowing the Company to pursue attractive opportunities that would be difficult to fund otherwise. Our model suggests the structure could generate strong returns for Frontier and their partner, and it will be far more material for Frontier than Gigapower is for AT&T.
- Jonathan Chaplin
1Q24 Broadband Trends
In this iteration of “Broadband Trends” we explore the drivers of the slowdown in the broadband market and the path ahead over the next couple of quarters as the industry works through the unwinding of ACP. We also reprise our work on the competitive positioning of the various operators based on relative NPS scores.
- Jonathan Chaplin
FYBR quick hit: Company raising new ABS debt
Frontier is issuing $750MM in ABS against assets in North Texas. We haven’t seen details of homes passed, subscribers, EBITDA, and cash flow for the North Texas market yet, but we would expect it to be similar to the Dallas market previously securitized. We would expect leverage to be similar too at ~8.4x net cash flow (as defined by Fitch). The debt cost will likely be lower than their last ABS deal of 8.8%; recent deals have a spread that is 100-150bps than Frontier’s last deal.
- Blair Levin
- Blair Levin
NSR Policy: ACP: Some DC Movement but ISPs Moving On
In this Weekend Update, we summarize the four Congressional efforts to extend the Affordable Connectivity Program (ACP): - Two in the House (including a new one from the Republican side,) but where we think Speaker Johnson remains the primary obstacle, and - Two in the Senate, both of which involve spectrum as a funding mechanism, and where Senator Lujan’s effort has some bipartisan momentum but not likely enough to move forward to passage. - Meanwhile, the ISPs are deep into their post-ACP pl...
- Jonathan Chaplin
The broadband Open Access model
We created a model to better understand the economics of Gigapower for both AT&T and Blackrock. Please use the model and give us your thoughts. The model clarifies the value of broadband assets generally. It also clarifies why we are likely to see similar JVs from Frontier, Lumen, and others. We will adapt this model for those instances in due course.
- Jonathan Chaplin
- Jonathan Chaplin
Autumn for Broadband 1Q24
In this installment of our Autumn for Broadband series, we provide a quick update on trends in the broadband market based on what we have seen from the companies that have reported so far. Industry net adds were substantially weaker in 1Q24 with all technologies seeing slower growth (except DSL which was flat). Cable was impacted the most.
- Jonathan Chaplin
- Jonathan Chaplin
FYBR: quick thoughts following the call Part 2
We commented earlier on the implications of the delay in the analyst day. In this follow up, we cover: 1) the growth / margin trade-off; 2) fiber broadband ARPU growth; 3) SAC growth; 4) EBITDA growth; 5) fiber penetration; 6) ACP; 7) fiber net adds. We covered what we expect for the strategic review in our quick take on results this morning.
- Jonathan Chaplin
- Jonathan Chaplin
FYBR 1Q24 Quick Take: Strong financial results powered by ARPU growth
Financial results were better than expected, driven by very strong ARPU growth. Subscriber trends were mostly in-line. We suspect EBITDA estimates have to inch up towards the high-end of guidance following these results. This is the one investable broadband stock that is delivering strong results in a difficult market.
- Jonathan Chaplin
Broadband market growth slower in 1Q24
Broadband industry growth slowed in 4Q23. We wondered, exiting the quarter, whether growth would level off or slow further in 1Q24. Based on the data we have collected so far, it appears that growth has slowed further, and possibly quite materially. We suspect slower growth will impact all operators, although for fiber, it should be partly offset by footprint expansion.
- Jonathan Chaplin
Frontier Model Update
We are updating the model to reflect the slower growth we expect for the broadband market. Lower net adds drive lower revenue and EBITDA, though we remain above Consensus for EBITDA and above the mid-point of EBITDA guidance for the year. Our thesis is unchanged. Price target is $54 (+123%).
- Blair Levin
NSR Policy: Net Neutrality: It’s Back!
This week, we focus on the FCC’s upcoming Net Neutrality order, which is likely to be made public on Thursday and voted on April 25. The big picture is that the item will be approved on a 3-2 vote and largely resemble the 2015 order. As we have been in the past, we are skeptical that the rules will be material to the financial performance of the ISPs but there are a few interesting nuances to this iteration.
- Blair Levin
NSR Policy: State of Play of BEAD
In 2024-25, one of the biggest events in the telecom sector will be how the federal government and states spend the $42.5 billion Congress appropriated for deployment to unserved and underserved locations as part of the BEAD program. In this Weekend Update, we provide a state of play on the program, including outlining the process going forward, the timing, the Fiber v. FWA debate, what has worked, what challenges lie ahead, the election impact (or lack thereof) and the quick take from the compa...
- Jonathan Chaplin
Fiber to the Future – Broadband Trends; Infrastructure Wars; New ILEC ...
We just wrapped up the second day of the BCG and NSR Fiber to the Future Conference. The second day featured discussions with over 30 companies including Altice USA, AT&T, BT Group, Charter, Dycom, Deutsche Telekom, Frontier, Goldman Sachs, Liberty Global, Lumen, Recon Analytics, Shentel, TDS Telecom, Tillman Global, Tucows, and Verizon.
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