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In the first quarter, Altice USA's fiber expansion continued to stand out from declining broadband figures
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The company is also "optimistic about the trajectory" of its mobile business
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Total revenue fell 1.9% year on year to $2.3 billion
In the face of declining broadband figures, Altice USA's fiber expansion remains a bright spot.
Altice grew its fiber customer base to a total of 395,000 subscribers in Q1 2024, an 88% increase compared to the same period in 2023. But overall broadband losses and ARPU trends were worse than expected, analysts said.
Net fiber customer additions of 53,000 made for Optimum's best quarter for fiber adds, up from 45,000 last quarter. Fiber penetration increased to 14.2%. However, the operator's net broadband losses increased year on year from 19,000 to 29,400 in the recent quarter as it continued to shed non-fiber broadband subs.
A note from New Street Research analysts said they’ve been tracking the “sharp slowdown” in broadband industry growth. “Altice didn’t change the picture for the industry – net adds are down ~39% from last year,” they wrote.
“It is hard to analyze” exactly what is driving that slowdown, they added. One reason broadband companies are citing is market saturation (the analysts called that “unlikely”). They’re also pointing fingers at an increase in mobile-only households (more “plausible,” the analysts said.)
Competition landscape
In terms of footprint growth, Altice added 45,000 fiber passings in Q1 2024, reaching 2.8 million in total. The company aims to add 175,000 new passings in 2024, compared to 165,000 in 2023.
During its earnings call, Altice CEO Dennis Mathew said the competitive landscape looks different across its footprint in the East versus in the West. Altice USA serves a total of 21 states. Its Optimum East territory comprises the New York tri-state area, including New Jersey and Connecticut. Everywhere else, including Louisiana, North Carolina and Texas, falls into the Optimum West bucket.
Up to 8 Gig symmetrical speeds are available across Altice’s Optimum East Fiber footprint, where the company has particularly been able to “stabilize churn,” he said. Altice competes with Verizon's Fios service in its eastern footprint.
In the West, the company is continuing to see overbuilds, with 200,000 overbuilt passings in the second half of last year alone, according to Mathew. “And we do see these folks coming in and taking some share upon initial launch,” he added.
Verizon is going hard after the lower end of the market, he noted, with low-cost, low speed offerings and a fixed wireless service.
“So, there is a bit more amplification and competition at that lower end,” he added. “We have a lot of headwinds to work through… There are just less jump balls, less calls coming into the call center, less shoppers online.”
On the plus side, he claimed the company’s numbers against fixed wireless are beginning to stabilize, and some of its local go-to-market strategies are helping it compete more effectively. For instance, the company right-sized around 300,000 of its customers to higher speed tiers. In the first quarter, Altice also reduced non-promotional rates for its fiber internet tiers by $30-$50.
Looking to the future, Mathew’s roadmap for the company has remained positive. He didn’t say much about “Chaltice,” a rumored merger bid that began floating around after sources told Bloomberg that Charter is working with financial advisors to determine if it makes sense to buy Altice.
Optimum mobile update
Despite its broadband losses, Altice USA CFO Marc Sirota said the company is "optimistic about the trajectory" of its mobile business.
Altice added 29,000 customers for its Optimum Mobile in Q1 2024, a 3.8x increase year over year. The service now reaches 352,000 lines. But despite launching two years after cable rival Comcast's mobile service and one year after Charter Communications', Altice USA's remains significantly smaller.
As of the end of Q1 2024, Comcast boasted 6.9 million wireless customers while Charter had 8.3 million. In fact, Charter's mobile net add figure for Q1 was larger than Altice's entire mobile customer base.
That said, Altice isn't giving up. Mobile customer penetration of the broadband base was 5.3% at the end of Q1 2024, up from 3.5% at the end of Q1 2023.
In the first quarter, Optimum Mobile launched in business services, and later this year the company plans to expand mobile product offerings to tablets, smart watches, device protection and to launch accessories in e-commerce platforms.
Q1 financials
Total revenue for the quarter fell 1.9% year on year to $2.3 billion. The company posted a net loss of $21.2 million, but that was an improvement from a loss of $25.9 million last year.
Broadband ARPU declined 1.4%. The New Street Research analysts noted Altice’s ARPU is “higher than competitors and peers, which makes it challenging to get back to subscriber growth.”
“The best-case scenario would see Altice maintaining ARPU at current levels while peers and competitors catch up. The company is not quite tracking to that best case at present,” they added.
Adjusted EBITDA was $846.6 million. EBITDA declined 2.5%, worse than the analysts’ forecast of -1.5%. However, they said trends “should improve during the year with the help of political advertising.”