reports
- Vikash Harlalka
FYBR Quick Hit: ABS debt priced
Frontier announced pricing for its latest ABS debt this afternoon, raising $750MM. The offering consists of $530MM Class A-2 notes at 6.2%, $73MM Class B notes at 7.0%, and $147MM Class C notes at 11.2%. The average cost of debt is 7.4%, which is in-line with our expectation, and ~140bps lower than their last ABS debt issuance. These new tranches of debt have an anticipated repayment period of 7 years (vs. 5 years on the last issuance).
- Jonathan Chaplin
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 v...
- Jonathan Chaplin
ACP Part V: FCC releases survey results
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 ...
- Jonathan Chaplin
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.
- Jonathan Chaplin
Frontier Model Update
This note focuses on changes to the model following 4Q23 results. Earlier today, we published a review of results and additional thoughts following the earnings call. Our net adds, revenue and EBITDA are slightly higher. Capex and FCF burn are also higher. Our long-term thesis remains unchanged. Price target is $54.
- Jonathan Chaplin
- Jonathan Chaplin
FYBR 4Q23 Quick Take
The most two most important words in the release are “sustainably accelerating”, and they apply to Consumer revenues and Consolidated EBITDA (management anticipates “stable” Business & Wholesale revenue). We expect EBITDA to accelerate through 2024 averaging mid-single-digits in 2024 and reaching double-digits in 2025. The guidance corroborates this.
- Jonathan Chaplin
Frontier Model Update
This is just a housekeeping note to clean up our estimates ahead of results this week. We have kept our 4Q23 subscriber, revenue and EBITDA estimates unchanged, but capex is slightly higher. Our subscriber estimates are in-line with consensus, but our revenue and EBITDA estimates are slightly below. Price target is $54. Long-term thesis is unchanged.
- Jonathan Chaplin
- Jonathan Chaplin
ACP Part II: estimating the impact on Broadband companies
We previously published a report exploring the impact of the loss of ACP subsidies on Charter. In this report, we have improved and expanded our framework in two ways: first, we expanded the analysis to include more broadband providers, including Comcast, Altice, Cox, Lumen, Frontier, and others; second, we found new publicly available data that informed our estimate of ACP recipients by operator.
- Blair Levin
NSR Policy: LEAD Story Again Hits Telco Stocks. But is that the Right...
The Wall Street Journal (WSJ) yesterday published a follow up article to several articles last summer that investigated the presence of lead in telephone networks. Yesterday’s article had a negative impact on telco stocks, with VZ down 3.02%, T down 3.79%, FYBR down 6.43% and LUMN down 7.06%. In this note, we provide links to our previous thinking on the subject, summarize the key elements of the new WSJ article, provide a summary of the state of play and then offer our views on the key investo...
- Jonathan Chaplin
The future of mobility and convergence – Day Two
We just wrapped up the second day of the BCG and New Street Research Future Series conference, which this year was focused on the Future of Mobility and Convergence in the Era of AI . The second day featured discussions with over 30 companies, including AT&T, British Telecom, Deutsche Telekom, Frontier, Globalstar, Liberty Global, Omnispace, Recon Analytics, Samsung, Telecom Italia, and Vodacom.
- Blair Levin
NSR Policy: Can TMUS, T, VZ, or DISH Improve Their Relative Spectrum P...
In this Weekend Update our focus is where wireless carriers might be able, in the near term, to gain a spectrum advantage over their competitors. As we report, wireless hopes for a near-term allocation of spectrum in the 3.1- 3.45 GHz band appear to be vanishing. But there are several proceedings that might help individual carriers. TMUS appears to be close to finally getting licenses for the 2.5 GHz spectrum it purchased in an auction in the summer of 2022. T faces an uphill climb but may obtai...
- Jonathan Chaplin
Frontier Model Update
This note (very belatedly) focuses on changes to the model following 3Q23 results. On the day of results, we published a review of results and additional thoughts following the earnings call. Our net adds are nearly unchanged, but we have lowered revenue and EBITDA for 4Q23. Our long term thesis remains unchanged. Price target increased to $57.
- Jonathan Chaplin
Broadband Trends: Frontier's penetration targets are achievable
We published our big report on broadband trends on Sunday. Today we are highlighting one slide that addresses one of the more prevalent worries that investors have with respect to Frontier - can Frontier hit their penetration targets. We created a measure with Recon Analytics data that shows how Fronter's fiber NPS is evolving relative to their direct competitors. We think the trend should give investors confidence in Frontier's ability to hit their targets.
- Jonathan Chaplin
Broadband Trends: Cable's problem is with the pricing strategy, not AR...
We published our big report on broadband trends on Sunday, and on Monday, we pulled out one slide that showed that their competitive challenge lies with pricing and customer support more than with the product. Today, we pulled out another slide that looks at the pricing issue more closely. It shows that cable's ARPU is probably fine. Cable's problem stems from acquiring subscribers at low promotional prices and then increasing those prices sharply over a year or two.
- Jonathan Chaplin
- Jonathan Chaplin
3Q23 Broadband Trends: A closer look at NPS trends across technologies
In this iteration of “Broadband Trends” we compare net-promotor-scores (NPS) across operators. We believe NPS will be a predictor of future market shares. We compare the NPS of each operator against a weighted index of that operator’s competitors to see how they are positioned competitively. We also reprise our work on the sources of FWA adds.
- Blair Levin
NSR Policy: Creating value by retiring copper infrastructure – a polic...
This week, we focus entirely on the issue of where, when, and how telcos can decommission their copper lines. We addressed this issue last year, prompted by T’s comments during an investor day about its plans to decommission copper. At that time, we provided an overview of the Wheeler FCC policy and how the Pai FCC loosened up the rules to, innhis view, lower the costs of decommissioning copper and speed up fiber deployments. The current Chair, however, dissented from the order approving the Pa...
- Jonathan Chaplin
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