Frontier Communications Parent, Inc. (NASDAQ:FYBR) Q3 2023 Earnings Call Transcript

Scott Beasley: Yes. So on your final question of will discounted bundles will the expiration of those help us. We compete on a number of dimensions like Nick said, we have a superior product. We have now superior customer experience versus our competitors and we have a favorable market structure. So I think in general, people are — you can see from our customer net add numbers that customers are increasingly choosing fiber versus a cable alternative and we think that will continue.

Operator: Our last question will go to the line of Frank Louthan with Raymond James.

Frank Louthan: Back to your commentary on the margin additional cost savings. When you hit your 40% fiber penetration rate, how much of the legacy copper operating costs and you remove [ph]? And then how long does it take to get all of those costs out and really shut down the copper network? Give us an idea of how that kind of paces with the build going forward.

Scott Beasley: Sure, Frank. Let me talk about the margin, how that translates into margins and I’ll talk about timing. So we’re in the high 30s margin now. We’ve said in the steady state, we would move towards the mid-40s or potentially even high 40s. A lot of pure fiber players are even north of 50% margin. So just our fiber mix improving changes the margin profile. And then we’ve got to be aggressive in taking cost out of the legacy copper footprint and that happens in a few ways. Number one, it happens incrementally where we reduce our copper customer base as they transition to fiber. That improves customer experience. We have fewer repairs, fewer calls, lower electricity costs as we kind of migrate customers off of copper.

And those happen incrementally, you’ll see that just in a gradual improvement in the margins. The step change improvements in the margins happen when you get that final customer off of a copper wire center, you can decommission a full wire center of copper, take out the central office costs, take out the electricity cost, take out any remaining maintenance and repair costs. We’re actively pursuing that cost mitigation but it’s a multiyear journey. So probably will be a few years until you see those big step change improvements in cost reduction from our copper decommission but we are improving margins all the time, you saw. We improved in about 100 to 200 basis points versus last year. A portion of that is improving fiber mix and ARPU but a portion of it is lower copper costs.

Spencer Kurn: Thanks, Frank. That concludes our third quarter 2023 earnings call. Thank you all for joining us.

Operator: That concludes the Frontier Communications third quarter 2023 earnings call. Thank you for your participation. I hope you have a wonderful rest of your day.