Frontier Business’ fiber efforts boost Q2 business results, but copper declines remain a drag
Frontier continues to see the fruits of its fiber services-centric focus benefit its business services results, a trend that continued into the second quarter despite ongoing copper service disconnects.
Driven by growth in data and internet services, Frontier’s business and wholesale fiber revenue was $317 million, up 11.6% year over year.
It also saw an increase in customers. 2,000 net additions of business and wholesale fiber broadband customers resulted in 9.8% year-over-year growth for these customers.
Speaking to investors on Frontier's second-quarter earnings call, CEO Nick Jefferey said that the service provider fared better than other providers whose business service revenues declined.
“Our business and wholesale revenues grew 2% in the year's first half, significantly better than the industry's high single-digit declines,” he said. “And I'm encouraged by the underlying strength of our fiber growth in business and wholesale, which grew 9% through the first half of this year.”
However, the quarter saw some challenges.
Frontier’s Business and Wholesale fiber broadband customer churn was 1.31% compared to 1.29% in the second quarter of 2023. Likewise, the Business and Wholesale fiber broadband ARPU of $97.83 decreased 2.5% year over year.
Jeffery said that business and wholesale revenue go through fluctuations every quarter.
“On business and wholesale, this kind of revenue can be lumpy when you can win a big deal in a quarter or the time between winning a deal and converting it to revenue,” he said. “That said, we significantly outperformed the industry last year, and that's strong ongoing performance into the first half of this year.”
Fiber growth to continue
Frontier said it is on track to see continued growth in the Business and Wholesale services segment despite any near-term challenges.
Jeffery said he expects “to come in towards the higher end of our previously expected plus or minus 1% to 2% growth range over 2024.”
The ongoing fiber build-out for more businesses will drive all of this.
By the end of 2023, the service provider was ranked ninth on Vertical Systems Group’s U.S. Fiber Lit Buildings LEADERBOARD.
Joining 11 other Tier 1 providers like AT&T, the twelve retail and wholesale fiber providers on VSG’s LEADERBOARD qualify for this benchmark as of year-end 2023 with 15,000 or more on-net U.S. fiber-lit sites, including commercial buildings and Data Centers.
Jeffery said its ongoing efforts to build fiber to more business locations enable it to connect more customers and, as a result, offer higher bandwidth speeds and value-added services, delivering higher ARPU, all of which leads to revenue growth.
He said these efforts are part of “a repeatable flywheel driving our growth.”
“I expect this fiber growth to continue,” Jeffery said. “It's part of the flywheel that I described to offset the predictable declines we see in our legacy copper.”
Business copper deactivation
Still, for all Frontier’s efforts, it can’t escape the ongoing reality of declining copper-based service revenue.
For the second quarter, Frontier reported that business and wholesale revenue of $677 million rose 3.7% year-over-year as growth in fiber was partly offset by declines in copper.
The service provider has been focused on growing fiber product revenue while managing it's legacy copper declines.
Frontier’s copper revenues have been flattening in recent quarters.
“Copper deactivations have been roughly flat,” said Frontier's CFO Scott Beasley. We've had some pricing actions to help offset cost increases. We're managing our copper decline on both the business and consumer sides.”
He added, “We're managing a still declining market, but we've made good progress balancing those different objectives.”
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Sean Buckley
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