Betting the ranch on turning copper into gold. What was a sleepy old DSL provider is now a fiber first company with 1.7M fiber broadband subscribers generating $1B in EBITDA from fiber alone. Does this growth company deserve to be valued at 6x?
I wonder how many homes using copper based providers eventually move to 5G solutions vs Fiber solutions. There are a fair number of moderate bandwidth users who would be quite happy with lower cost and trivial to install FWA from t mobile and Verizon. This isn’t just a Frontier issue but for all fiber buildouts. It makes me suspect that adoption numbers will be lower than targeted for everyone.
I'd be careful in taking management's word at what is "fiber" EBITDA... There is a big piece of data and internet services revenue that is "network access services" or a shrinking B2B/wholesale business, which along with the legacy voice business will be a big drag on the business... I think there is a lot included in fiber EBITDA that is not very high quality... This also makes looking at EBITDA per customer on the broadband business unhelpful... I find it curious that management has not give consolidated EBITDA targets that align with their broadband sub targets and that their compensation plans are largely based on fiber passings not ROIC/profit targets. I think the returns on these fiber builds are still very much up in the air and would not be surprised if they are lower then their 8-9% cost of debt. Lumen's pause and reevaluation of its build plans suggests they might not be so compelling...
Frontier Communications (FYBR)
I wonder how many homes using copper based providers eventually move to 5G solutions vs Fiber solutions. There are a fair number of moderate bandwidth users who would be quite happy with lower cost and trivial to install FWA from t mobile and Verizon. This isn’t just a Frontier issue but for all fiber buildouts. It makes me suspect that adoption numbers will be lower than targeted for everyone.
I'd be careful in taking management's word at what is "fiber" EBITDA... There is a big piece of data and internet services revenue that is "network access services" or a shrinking B2B/wholesale business, which along with the legacy voice business will be a big drag on the business... I think there is a lot included in fiber EBITDA that is not very high quality... This also makes looking at EBITDA per customer on the broadband business unhelpful... I find it curious that management has not give consolidated EBITDA targets that align with their broadband sub targets and that their compensation plans are largely based on fiber passings not ROIC/profit targets. I think the returns on these fiber builds are still very much up in the air and would not be surprised if they are lower then their 8-9% cost of debt. Lumen's pause and reevaluation of its build plans suggests they might not be so compelling...