Anton Rinnert: Got it. Thanks.
Scott Beasley: Thanks, Anton. Operator, we’ll take the next question.
Operator: Our next question is from Sam McHugh with BNP Paribas. Your line is now open.
Sam McHugh: Good morning, guys. Excuse me, couple of questions. On the ’23 expansion market, we can see the penetration rates look a bit more like the ’21 build versus the ’22 build. So just any color you can give on how we should think about the progression of those builds and the similarities or differences to the previous builds? And the second question was on pension contributions. So you reiterated the guide of the $125 million for the year. But just in Q1, we saw a $146 million change in the cash flow on the pension and post-retirement liabilities. I wonder if you could just help us square the circle on those two numbers? Thanks.
Scott Beasley: Sure. So on, I’ll take the cohorts and then talk about the pension contribution. I mean, I think the — we’re very much in-line with where we’ve expected to be an expansion penetration. We’ve hit the target range for all of the different cohorts. But we’ve said every cohort is going to be slightly different. They’re going to have different geographic mixes. They’re going to have different build type mixes, different mix of single-family, multi-dwelling, SMB. And so I wouldn’t draw too many conclusions from a single quarterly cohort. You really got to look at a full-year or even multiple years. And when you do that, you’ll see our customer growth is very healthy and our penetration rates are right on-target with where we expected them to be.
And that’s with the accomplishment of 6% ARPU growth. So we feel-good about overall expansion growth and where that’s headed. On the pension contribution, we — there were a few moving parts and we contributed $52 million of cash in Q1. And then there was also, given the change in discount rates and a retirement package that a number of employees took, there was a pension revaluation. We’ll have more details on that in the Q that will be published later today.
Sam McHugh: Awesome. Thanks, Scott.
Scott Beasley: Thanks, Sam. Operator, we’ll take the next question.
Operator: Our next question is from Peter Supino with Wolfe Research. Your line is now open.
Peter Supino: Hey, good morning, everybody. I wanted to follow-up on Mike’s question earlier in the Q&A about base penetration. Mike or rather maybe Scott or Nick, could you discuss the composition of your gross adds in your mature 45% penetrated markets? We’re curious about their ARPU and their origin. For example, are they mostly movers or is this same location switching from cable as you experienced in the younger vintages? And then in the same markets, how does ARPU compare to your base? Does it skew towards premium? Or are these new gross adds more price-conscious customers, like the ones targeted by your value segment promo in the first quarter? Thanks.
Nick Jeffery: Yeah. Hi, Peter. Nick here. I mean just to remind everybody what we’ve said on multiple earnings calls before, that the vast majority of our new customers come from cable. That’s where we’re winning. And in fact, we have taken market-share from every competitor in every geography we operate in now for a number of quarters. But Scott, do you want to pick-up the specific question on kind of ARPU and?
Scott Beasley: Sure. So we don’t differentiate externally between base ARPU and expansion ARPU. I’d say our intake ARPU is still very healthy. We have had a promotional offer in certain parts of our geography, largely to kind of smooth out the transition from ACP that offers resonating with customers. But we have a large portion of our customers taking our premium plans. So we talked about roughly 60% of our new customers are taking 1 gig or higher. We’ve actually had increasing success with 2 gig and 5 gig, which has been great. And then we have a healthy portion of our customers taking value-added services at the point-of-sale because they realize that they want Whole-Home Wi-Fi or YouTube TV or other different value-added services that we offer. So, we’re encouraged by our intake offer by our base ARPU, as well as our expansion ARPU.
Peter Supino: One more question if I could, on competition in your — in your copper footprint. Is there an argument for going faster in your fiber expansion within your ILEC footprint? And could it even make sense under some circumstances to use a financial partner in order to go faster given the interest of multi-tenant models in building out their footprints? Thank you.
Nick Jeffery: Yeah. Hi, it’s Nick. I’ll take that. Yes, look, we’re building as fast as we can and as fast as the company as a whole can sensibly manage, and by sensibly I mean making all parts of the company work to produce the kind of really strong results you see in the first quarter. Now why are we doing that, of course, in-part to make sure that we preserve the very attractive market structure that we operate in, where across our footprint, in 86% of our footprint, we have one or fewer gigabit capable competitors and market structure is one of the most attractive things about the fiber market in the US and relatively unique in my experience relative to other markets around the world. It’s a really a beautiful thing and one of the main reasons I wanted to come to Frontier and see if we can make this the company that I think it can be and this quarter is great evidence that we’re doing that. So perhaps, Scott, any comments that you want to make on this?
Scott Beasley: No, I think we have a lot of different opportunities to fund the build. We’ve talked about we’ll — we are exploring different financing options, different joint ventures, different strategic partnerships. So if the opportunity comes to build even faster, that’s part of the strategic review and we’re looking at that right now. Thanks, Peter.
Peter Supino: Thank you.
Operator: Our next question is from Nick Del Deo with MoffettNathanson. Your line is now open.
Nick Del Deo: Hey, good morning, guys. So you know you emphasized that over 60% of new customers are taking speeds of at least a gig. It looks like in the recent months, you’ve introduced a 200 mega plan. I assume that was primarily to help with ACP customers, because I think historically, the lowest you’ve offered is 500 megs. I guess, was ACP kind of the sole goal or are you marketing that more broadly? Are you planning to keep it longer-term? And then second, you know on the BEAD front, can you update us on any work you’re doing outside of a potential JV or other capital source to preparing for that like getting the data models together, conducting outreach with the PUCs and so on?
Nick Jeffery: Yeah. Thanks, Nick. I’ll start perhaps and then Scott, you pick-up the second-half of the question. Yeah, look, we’re really, really pleased with the rate at which new customers are trading up our speed ladder and buying more value-added services. You know if we track back to the beginning of this story three years ago or 3.5 years ago, when we set out our pricing strategy, it was an abstract concept then, but we’ve really brought it to life and pretty much every quarter, we’re seeing the percent of customers taking gig plus service increase and that just speaks to the fundamental demand that’s out there in the market for the best, the newest, the fastest, and that’s what we provide. So really, really strong traction right across the customer cohorts, trading up from 0.5 gig to 1 gig, 1 gig to 2 gig, 2 gig to 5 gig.
And I’ll remind everybody that our network is already 10 gig symmetrical capable end-to-end and would be upgradable beyond that for very, very limited capital because the fiber system is already in the ground and we would only need to change the electronics, which is a very simple thing to do to go way, way, way beyond that. So we have a very, very extendable speed price ladder. And then of course, we layer value-added services on-top of that and we’re finding customers really, really want to buy those sorts of things. So we’re going to keep extending that portfolio as well. So that bit of the machine works really, really well. But part of our role is also to make sure we have all quadrants of the market covered. Not just the very-high end, but also the on-ramp to that ladder of the lower end.
Hence the 200 meg plan that you’re seeing. That’s I think best viewed as an experiment, as a pilot, a prototype. We do that all the time in different geographies, in different ways, trying to figure out how we create real value for our customers and unlock new value solutions to ourselves. Now it is true that in-part, we were experimenting with ways just to capture some of the ACP market. And I’ll remind everybody that we actually have a relatively low exposure to the ACP market, about 4% of our customers, but there are other ACP customers out there that may find Frontier an attractive opportunity. And so we were kind of prototyping what might work for those customers. And we pulse those pilots in and out of geographic markets all the time.
So you’ve picked-up on one, but you’ll see many others if you look closely around the country. We pulse them in, we learn, we pulse out, we review, we regroup and we go again. And we keep doing that cycle right across our speed ladder to find out what the optimal mix is. And at the end of the day, that results in the kind of things you’ve seen with you know 18% growth in our consumer fiber broadband, 6% ARPU growth and 24% combined growth. So that’s the sort of broader picture on what you’re seeing with the 200 meg offer. Scott, do you want to just pick-up the second point?
Scott Beasley: Sure. Let me answer your BEAD question, Nick. You’re right, we are deeply involved in scaling up a team to go after BEAD in a disciplined but strong way. So we’ve built-out a — built-out our grants team. We have an excellent team. We’ve done a lot of data modeling and actually included BEAD eligible locations and adjacent areas into our integrated build model. So we have an understanding of how they would fit with what we’re already planning to build. We’ve begun outreach to states and then we’ve even begun the pre-qualification process with a handful of states. So in terms of timing, anybody’s guess as to when that starts flowing in greater numbers. But we’re ready for BEAD. We think it’s an important program. We’ll be disciplined on it. But we think it’s an exciting way to expand our total addressable market. Thanks, Nick. Operator, we’ll take the next question.
Operator: Our next question is from Simon Flannery with Morgan Stanley. Your line is now open.
Simon Flannery: Great. Thank you very much. Good morning. Just coming back to the outage quickly, are you or have you granted any credit to customers? Is there anything we should be thinking on that front? And then on — you talked about the strong growth in your fiber revenue. Business in wholesale was particularly strong. I think it was up about 8% sequentially. I know you talked about some of the drivers like your pricing actions and value-added services, but any more color you could talk about? Is this a good run-rate going-forward? Thanks.
Scott Beasley: Sure, Simon, let me take the first one. We’ll stick to what we’ve said in the 8-K where we don’t expect it to have a material financial impact. But beyond that, aren’t talking about any specifics around customers or systems. On business in wholesale, you know we’ve said that is the lumpy business where you get some orders, some big installations that may hit one quarter, not another quarter. We’re really encouraged by the underlying strength of business in wholesale, the fiber portion of that grew healthily. That’s going to be the driver there. And then the offset is going to be managing the legacy product churn. And we did a really good job of that in Q1, we’re staying focused on that. So, again, business in wholesale, we expect to be roughly stable throughout the year, that’s plus or minus 2% and this was a good start to the year. Thanks, Simon.
Simon Flannery: Great. Thank you.
Scott Beasley: Operator, we’ll take the next question
Operator: Our next question is from Frank Louthan with Raymond James. Your line is now open.
Robert Majek: Hey, guys. This is Rob on for Frank. So you mentioned earlier on the call that ACP is an unknown impact to you guys. Can you quantify your ACP exposure in terms of number of subs? Also, what are you currently seeing in the way of fixed wireless access competition in the marketplace? And then lastly, have you seen any recent changes to the construction outlook or is everything mostly running on schedule? Thank you.
Scott Beasley: Sure. Rob, good to hear from you. I’ll take one and three. So ACP and then the construction outlook and then pass to Nick for fixed wireless. On ACP, just a few data points, all of which we’ve shared before. So our exposure is relatively low, as Nick said, roughly 4% of our customer base. We do have an offer in the market to continue to serve that quadrant of the market. It’s resonating well and we don’t expect there to be material impact. We may even be able to win some new customers that roll-off of competitor ACP plans. But again, we’ll wait-and-see there. And then three, the timing is a bit unknown. We may see some impact from ACP roll-offs in late Q2, but more likely the impact will be in Q3 and Q4. So that’s ACP.
On your third question around construction outlook, we see it relatively stable. We have partnerships with great kind of national players. We have smaller regional partnerships. In large part, they’ve been able to scale-up to meet the demands of the industry. We’ve seen a number of other builders scale back their plans and that has relieved some pressure on labor costs. So we feel confident in the year and are thankful for our partners for continuing to deliver on our capital budget and on-time. And I’ll pass to Nick on fixed wireless.
