Cable One is happy to continue serving as a provider consolidator in smaller markets, often not pursued by major Tier 1 providers.
That’s not to say the provider does not have broad reach. It operates in 24 states, serving 1.1 million residential and business customers. It also owns the Fidelity Communications brand, which provides the same services in Arkansas, Louisiana, Missouri, Oklahoma, and Texas.
Speaking to investors during its third quarter call, Julia Laulis, president and CEO of Cable One, said that the company is focused on having a local feel in the communities it serves. While Cable One has participated in M&A, acquiring Fidelity Communications and Hargray, those companies have deepened their footprint in smaller markets.
“We deeply understand what it's like to do business in markets that average about 20,000 customers where we are neighbors with our customers,” she said. “We know how to operate in disparate regions where we're not all consolidated, how to bring focus, and how to achieve almost scale-like efficiencies through our operations.”
She added that “for those reasons, I think we are a natural aggregator,” while recognizing that the “environment is changing incredibly rapidly.”
Large scale M&A response
Cable One’s consolidation thesis comes amid ongoing M&A by several Tier 2 and Tier 1 fiber players.
BCE, Verizon, and others made notable moves to bolster their fiber holdings. BCE hatched a deal to acquire Ziply Fiber, giving it an immediate foothold in the U.S., while Verizon is moving to acquire Frontier.
Todd Koetje, CFO of Cable One, said, “You’re seeing large-scale consolidation in the M&A environment right now with some of these super regional platforms.”
However, he added that these deals would not impact the particular kinds of markets that Cable One serves.
“The needle-moving impact for those large companies will probably be less focused on our small communities,” Koetje said. “For T-Mobile, Verizon and BCE to move the build needle, it's either going to be upgrading to larger markets or building into larger markets.”
Overcoming churn, driving up ARPU
Like others in the broadband industry, Cable One struggled with growth during the quarter.
Taking out the impact from the discontinuation of ACP, which ended in April, high-speed data subscriber growth was flat.
The provider said it achieved this despite the ongoing transition to its new billing system. It has required suspending price adjustments for over a quarter, limiting its ability to make marketing adjustments to approximately 20% of its broadband internet customers.
Cable One enhanced its marketing team to support its growth strategy in the upcoming quarters, including hiring AT&T veteran Anthony Mokry as SVP of residential services.
While it lost 3,400 customers quarterly, discontinuing the ACP program cost 5,300 broadband customers during the quarter. However, it took what it said were measures to support its customers after ACP ended, which helped maintain its commitment to offering affordable services.
Laulis maintained that the effects of the end of the ACP program will continue to level off.
“Looking ahead, we believe the accelerated churn caused by the program's discontinuation is behind us, and we will consider any further churn from this cohort as part of the normal customer life cycle,” she said.
Cable One is working to create what it calls affordable service for value-conscious customers with its pilot pay-as-you-go internet offering. This service is tailored for residential customers who seek flexibility in managing their internet expenses.
Accessible through a mobile app, it allows customers to purchase high-speed internet in increments and adjust speeds as needed, ensuring they only pay for what they require.
“This product provides a true pay-as-you-go experience with no long-term commitments, contracts, or extra fees for the customer and a lower cost basis for the company,” Laulis said. “This is a pilot program, and we are just starting to gather insights from it, which will inevitably lead to program evolution as we refine how to serve this cohort of customers best moving forward.”
Residential results challenges
For the third quarter of 2024, Cable One’s total revenues were $393.6 million, down from $420.3 million in the third quarter of 2023.
The provider attributed the decline to lower residential data ARPU and continued attrition within its lower-margin product line. After declining sequentially over the year's first half, Cable One’s residential data ARPU stabilized from the second to the third quarter.
“We expect this trend to continue through the end of this year. Q3 residential data revenues decreased by $17.1 million or 6.9% year-over-year, driven by a 7.1% decrease in ARPU,” Koetje said. “This decline was due to targeted pricing and product strategies in specific markets to address select competitors, along with a focus on the valued customer segment, which generally has lower sell-in rates.”
However, Business Services were a bright spot for Cable One. Third-quarter business data revenues grew by $1.6 million or 2.9% compared to last year. Business data PSUs grew by 1,100 over the past 12 months.
Koetje said this “growth is fueled by strong demand across the carrier, wholesale and enterprise customer segments, which generate our highest revenues per customer and benefit from long-term contracts with high renewal rates.”
Here’s Lightwave+BTR’s third-quarter broadband earnings coverage
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Sean Buckley
Sean is responsible for establishing and executing the editorial strategies of Lightwave and Broadband Technology Report across their websites, email newsletters, events, and other information products.