Frontier is in a transitional time with its Business and Wholesale units, a trend seen in its fourth-quarter earnings results.
Driven by declines in fiber and copper, Frontier reported that fourth-quarter Business and Wholesale revenue was $635 million, down 3.6% year-over-year.
Frontier’s Business and Wholesale fiber revenue decreased 2.5% year-over-year to $278 million as growth in data and voice was offset by declines in other segments, primarily driven by one-time benefits in the fourth quarter of 2022 that did not repeat during the fourth quarter.
Nick Jeffery, president, and CEO of Frontier told investors during its fourth-quarter earnings call that its losses weren’t as steep as other ILECs’ business service revenues.
“We significantly outperformed the industry last year in our business and wholesale segments,” he said. “Our business and wholesale revenue was down about 1.5% in 2023 versus the industry, which consistently saw mid- to high single-digit declines.”
He added that “our trajectory is improving” and the “bright spot continues to be our fiber business in business and wholesale as in consumer, which in the Business and Wholesale segment grew by 4% in 2023.”
Growth ahead
Frontier’s Business and wholesale revenues were down 3.6% to $635 million as growth among small and midsized businesses and enterprise customers was offset by declines in wholesale.
However, Frontier expects that segment, which tends to be lumpy quarter to quarter, to stabilize in 2024.
Likewise, Frontier’s fourth-quarter business and wholesale fiber revenue declined 2% year-over-year as growth in SMB and enterprise was offset by declines in wholesale.
Jeffery cautioned that the wholesale segment results tend to fluctuate and that he expects a turnaround in the first quarter.
“While Business and Wholesale did decline modestly in the fourth quarter, it is a lumpy business with the timing of large contracts and payments,” he said. “And we expect that segment to return to year-over-year growth in Q1.”
Overcoming copper declines
Despite a dip in quarterly revenue, Frontier’s Business and Wholesale fiber unit did see an uptick in customers and a narrowing of customer churn.
With the addition of 3,000 new Business and Wholesale fiber broadband customers, the segment saw 13.2% year-over-year growth. Likewise, Business and Wholesale fiber broadband customer churn of 1.17% decreased from 1.31% in the fourth quarter of 2022.
Frontier noted in its earnings statement that Business and Wholesale churn had been updated for a new methodology, which includes wholesale, excluding circuits or fiber-to-the-tower churn.
However, Business and Wholesale fiber broadband ARPU of $98.86 decreased 6.2% year-over-year. Like the Business segment, Frontier said its Business and Wholesale ARPU had been updated for a new methodology, including wholesale, excluding circuits or fiber-to-the-tower ARPU.
Jeffery said Frontier has forecasted that the business segment will grow as more customers migrate from copper to fiber-based services.
“We expect fiber growth to roughly offset copper declines in this segment, resulting in a stable performance overall of plus or minus 1% to 2%,” he said. “We expect this top-line growth to come from an acceleration in consumer revenue with business and wholesale remaining relatively stable. Importantly, we plan to accelerate EBITDA growth this year into the mid-single digits.”
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