Altice USA’s CFO: We’re Focused on Reaccelerating Our Network Initiatives

Altice USA plans to enhance its fiber and coax network build out efforts throughout 2021.

  • Altice
  • Altice USA

Altice USA plans to reaccelerate its aggressive out fiber-to-the-home (FTTH) build throughout 2021 as the cable MSO sees ongoing demand for higher speed broadband services.

While the cable MSO had been impacted by permitting delays due to the pandemic in 2020, it is focused on ramping up its FTTH build out plans this year.

“We were impacted by permitting delays due to the pandemic but are focused on reaccelerating all of our network initiatives,” said Mike Grau, CFO of Altice USA, during the fourth-quarter earnings call. “We will continue to invest in our network, anticipating that we will see permanent changes in consumption behaviors across much of our customer base.”

But even with pandemic delays, Altice USA did make progress in expanding FTTH to more homes throughout 2020.

As of the end of the fourth quarter, Altice USA covered nearly 1 million homes with FTTH technology available for service. In the fourth quarter, FTTH sell-in to new customers increased to 58 percent in areas where FTTH is available, up from 44 percent in the third quarter. The fiber sell-in rate for 1 Gig was 67 percent at the end of 2020.

Altice USA has been accelerating the pace of its network edge-outs, organically adding 146,000 homes passed in 2020 across its entire footprint, with another approximately 70,000 homes passed from the acquisition of Service Electric in the third quarter. It is seeing strong momentum in growing customer penetration, typically reaching approximately 40 percent within a year of rollout in new-build areas.

Dexter Goei, CEO of Altice, said the company expects capital spending for 2021 to be between $1.3 billion to $1.4 billion as it moves forward with building out its existing Optimum footprint and in adjacent edge-out markets.

“On the capex deployment, we're full steam ahead on ramping up the fiber side and that is focused on the Fios zones and some non-Fios zones,” he said. “And on the edge-outs as well, we're well on track to building up that steam on that.”

Three-Pillar Network Strategy

As the service provider moves forward with its FTTH and overall broadband network expansion plans, it is taking a three-pillar approach: footprint expansion, network upgrade and FTTH.

The MSO will continue to accelerate new-build deployment, particularly in Suddenlink with additional opportunity to further penetrate the Optimum footprint. Despite abandoning its bid to acquire Cogeco (CGO) and Cogeco Communications from Rogers Communications, it will continue to pursue acquisitions of other cable operators like Service Electric that can enhance its footprint.

“We are extremely committed to expanding our footprint organically and/or inorganically on a go-forward basis as a key growth driver,” Goei said. “Our build plans include a combination of accelerating our newbuild deployment, particularly, around the edges of the Suddenlink footprint and fill-ins in the Optimum footprint with the goal being over 150,000 new homes constructed in 2021 and with further acceleration from there.”

Now that it has completed its 1 Gbps upgrade in the Optimum territory, Altice USA will continue to conduct network upgrades with increased RF bandwidth to be 1 Gbps capable in the Suddenlink footprint.

“We are also continuing to upgrade about 400,000 homes in the Suddenlink footprint through full upgrades of RF equipment, including new amplifiers and additional node splits to be up to 1-gig-capable,” Goei said.

Finally, Altice USA will continue to future-proof its FTTH rollout in Optimum markets to capture what is said is “meaningful cost saving opportunity with potential for additional monetization.”

“We continue to advance our fiber-to-the-home plan, ending 2020 with about 1 million homes passed ready for service,” Goei said. “Compared to our average 1-gig sell-in of 41 percent, two-thirds of our fiber customers are taking 1 gig. We are confident that accelerating fiber deployment gives us many opportunities to deliver not only [achieve] capex and opex efficiencies but drive long-term top-line growth as well.”

1-Gig, Fiber Resonates

Like other broadband providers, Altice USA found that network usage rose during the COVID-19 pandemic. This has driven increased usage of the MSO’s FTTH and 1 Gbps product offerings.

The MSO reported that broadband speed upgrades were 70 percent year-over-year and monthly data usage per customer was up 40 percent year over year, averaging approximately 468 gigabits per customer per month in during the fourth quarter.

Goei said that these “higher upgrade volumes continue to reflect enhanced connectivity needs from the switch to work-from-home and remote learning.”

Altice USA’s broadband-only customers use nearly 600 gigabits of data per month. Within this group, 41 percent of the company’s gross additions took 1 Gbps broadband speeds in areas where it was available, up from 29 percent in the third quarter.

After launching its fiber, fiber, double, and triple play offerings in the third quarter, Altice USA’s fiber selling rates are 58 percent, ending the year with just under 26,000 customers. Goei said this represents “an enormous growth and cost-saving opportunity.”

Additionally, Goei noted that two-thirds of the MSO’s fiber gross adds are taking the 1 Gbps product, which is higher than the proportion of customers taking 1 Gbps on its HFC network, “representing a great opportunity to differentiate our fiber offering and increase our revenue.”

By making 1 Gbps available across the Optimum footprint earlier in 2020, Altice USA increased its opportunity to continue to upsell customers to higher broadband speed tiers. Its 1 Gbps customer penetration increased to 7.8 percent in the fourth quarter. The 1 Gbps broadband capability is available across 92 percent of Altice USA's consolidated footprint that includes Suddenlink.

But with less than 8 percent of the total customer base using gigabit speeds, Altice USA sees an opportunity to drive further growth.

“We ended the year with over 55% of our base still only taking broadband speeds of 200 megabits or less which represents a meaningful opportunity for us to continue to deliver faster speeds to our customers,” Goei said.

Driven by 14 percent year-over-year broadband revenue growth and 29.7 percent News & Advertising growth, company revenue grew 2.5 percent year-over-year in the fourth quarter to $2.54 billion.

(To keep up with the Q4 broadband earnings, make sure to check out our new report From AT&T to Verizon: Sizing up Q4 Broadband 2020 Earnings)

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