Q2 2022 Altice USA Inc Earnings Call

Greetings and welcome to the Altice USA second quarter 2022 earnings results Conference call.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation. If anyone should require operator assistance. During this conference. Please press star zero on your telephone keypad. Please.

Please note that this conference is being recorded.

I will now turn the conference over to our host Nick Brown. Please go ahead.

Hello, everyone. Thanks for joining us today, we are joined by Altice USA.

The Guy and CFA might grow who will take you through the presentation and then we'll have time at the end for Q&A.

Today's presentation may contain forward looking statements. Please read the disclaimer on slide two.

Next I have a team.

Hello, everyone I'm kicking off with a summary of our second quarter performance on slide three.

Revenue declined two 1% year over year, mainly driven by our residential business.

Residential broadband customer net losses were 40000 for Q2, which with similar market dynamics to what we've seen in the last few quarters, but with some incremental pressure coming from normal seasonality, which we have not seen in a couple of years due to the pandemic.

Q2, adjusted EBITDA declined eight 8% year over year with a margin of 49%, reflecting both the revenue decline and higher opex to drive future growth.

Free cash flow remains robust generating $191 million in Q2, and about $400 million year to date, even with the elevated levels of investment to accelerate our fiber rollout and newbuild activity.

Our optimum fiber network deployment has meaningfully accelerated rolling out at a faster pace than we've ever achieved.

With as many incremental fiber passing is added in Q2 as the entire prior year of 2021.

At $1 6 million total total fiber passing we are very much back on track with our long term fiber build plan.

In the quarter, we surpassed 100000 fiber customers and expect it to continue to grow at an accelerated pace.

With the launch of multi gig speeds, we're now positioned as the fastest fiber broadband provider in the New York Tristate area.

Up to a mobile business also saw a significant acceleration of subscriber growth, reaching more than 200000 lines with attractive promotional offerings for optimum broadband customers.

Lastly, we've rebranded suddenly to optimum unifying telecommunications brands under one powerful national optimum brand, which will ensure consistency and simplification and all of our marketing offers and experience.

And we continue to rapidly expand our sales distribution channels, including the opening of several more optimum stores across the country.

We have begun to see the benefits of our reinvestment strategy and we're extremely focused on executing on all of our key growth initiatives, which we expect to improve our overall customer growth going forward.

Slide four shows our revenue trends in more detail.

Total reported revenue in Q2 declined two 1% year over year, mainly due to the trends in our residential business, which declined 3%.

Total revenue was down one 9%, excluding about $5 million of prior year error strand revenue.

To remind you our backhaul contract with T. Mobile was terminate at the end of last year.

This is resulting in the loss of about $120 million of air Strand revenue this year when comparing to 2021.

With about $110 million of this in the second half of the year coming out of our business services division, including $75 million in Q3.

Business service revenue in Q2 was flat down one 1% year over year on a reported basis, but grew one 3% excluding this air strand revenue.

Last news and advertising grew one 1% in Q2 as trends here are normalizing.

Turning to slide five in Q2 customer trends in our residential business.

We reported a net loss of 48000 residential customer relationships in a broadband net loss of 40000.

Call. The second quarter is normally seasonally weaker for sudden linked because of its exposure to university towns.

The difference Q1 and Q2 this year of about 26000 broadband customers is exactly in line with our four years average variation between these two quarters prior to the pandemic across 2016 to 2019.

In other words, the underlying performing of the business suggests yet we are yet to see a full benefit in pickup from our growth investments, but we are confident this will come as it remained full steam ahead on our various initiatives.

We're also continuing to see lower level of market activity and gross additions across our footprint, which we don't think is unique to us clear.

Clearly fixed wireless broadband is taking some of the growth and switches out of the market in the past couple of quarters with more aggressive promotions and there is some incremental pressure from fiber over builders.

Although visibility remains lower than normal we are still confident that we will return to broadband customer growth with our accelerated fiber rollout multi gig services and newbuild activity complemented by more attractive mobile bundles expanded sales distribution channels and improved customer service.

Slide six is a recap of our longer term fiber targets, where we are still on track to bring 100% fiber broadband delivering multi gig speeds to more than two thirds of our entire footprint over the next four years targeting a total of $6 5 million fiber to the home pass things by the end of 2025.

Given that more reliable fiber network service, we expect to drive higher gross additions and reduced churn as well as reduce longer term maintenance and technical service costs.

When comparing the experience of broadband customers on our fiber network to that of customers on our HFC network. We are now seeing 80% NPS improvements, 10% higher <unk> and 5% to six percentage points of annualized churn benefits and we're still seeing these customer metrics improve every quarter, which is <unk>.

Evidence of our fiber strategy really paying off.

In June optimum introduced symmetrical two gig and five gig fiber internet speeds tiers for the first time, making us the fastest residential fiber Internet service provider in the New York Tristate area.

We start by offering these multi gig spears tiers in select areas of long island, and we will progressively roll them out across the company's entire tristate fiber footprint by year end.

The fiber network. We're building is also very scalable as we've demonstrated with this multi gig deployment and we will continue to allow much faster upgrades in the future to enable more capacity and higher broadband speeds.

Slide seven is a current snapshot of our progress with our fiber build in customer trends.

You can see in the first row that we released the incremental 270000 fiber passing during Q2, reaching approximately $1 6 million pet total passing mainly in our optimum footprint.

To emphasize this is as many new fiber passing as in one quarter as we rolled out in the entire prior year showing that our construction team is now really hitting its stride without the same types of permitting and COVID-19 constraints that we've had over the past couple of years.

We expect incremental growth on fiber passing to remain at elevated levels. In Q3, following our increased investments in spring and summer months are more conducive to construction and deployment with the better weather.

You can also see that our quarterly fiber customer net additions also accelerated to 23000 in Q2, which is about double our prior quarterly run rate as we've been doing more proactive migrations in marketing the product more aggressively.

We have reached six 6% fiber customer penetration of our total FTE th passing with 104000 fiber customers at the end of June .

Note, our total customer penetration, including both our fiber and cable customers is over 50% in these areas, where we have fiber coverage. So we're reinforcing our incumbent position with our fiber upgrades here.

On slide eight you can see we've added also 58000 newbuild passing in Q2, and 100000 year to date, putting us well on track to add approximately 175000, passing organically this year.

We're mostly edging out around the suddenly footprint and about one third of our total newbuild activity. This year will be new fiber homes.

We are consistently achieving over 40% penetration after the first year of expanding our network into new areas, which is correlated to new customer growth.

To update our broadband subsidy applications.

Graham We received awards of 24000 homes year to date totaling $35 million of subsidy grants.

In Q2, we were awarded the grants for 9000 homes in Louisiana and 7000 homes in Arizona. In addition to the 8000 homes, we awarded in Arizona in Q1, we will be deploying FTE th and all of the areas, where we receive grants.

We are very excited about the public grant co funding as this opportunity to deliver rapid.

Fiber coverage to Unserved and underserved areas.

We're very focused on continuing to be the trusted partner for local governments to help bridge the digital divide.

Slide nine demonstrates the long runway, we have to sell fiber broadband services that can support very high levels of data usage.

The average download speeds customers take across our total base was just under 400 Megabits per second as of Q2.

But our fiber customers are taking twice the speeds on average.

Our one gig customer penetration and increased 18% in Q2 and this continues to grow every quarter.

Around 45% of our customer base take speeds of 200 megabits per second or lower so we still have a huge opportunity to keep driving customers to higher speeds, especially as we market multi gig speeds on our fiber network more broadly.

Average monthly data usage for broadband only customers was 578 gig big gigabytes in Q2 with video streaming is still the biggest driver.

For our highest data driving customers about 15% of our base of broadband only customers are using about more than one terabyte of data per month.

Incredibly but not unexpectedly more than one quarter of our fiber customers are using more than one terabyte of data each month.

There's no better technology than fiber to support this sort of structural growth trend.

Slide 10 provides an update on our optimum mobile business, where we have reached 231000 customers as of the end of Q2, representing five 1% penetration of our residential customer base.

Recall, we launched more competitive internet plus mobile converged offerings in January .

In March we announced an expanded <unk> agreement with T mobile, allowing us to offer more attractive mobile promotions, including extremely competitive multiline discounts, which we have summarized on the right hand side of this slide.

And we're pleased to be recognized for excellence in customer satisfaction being ranked number one amongst full service wireless providers by the Aes Ci recently.

Our aggressive one gigabyte mobile promotion again drove the majority of the additional customer growth for the quarter, even though we've updated this offer to $5 per month. We believe we can maintain a higher level of underlying mobile customer growth going forward and expect this will help provide an improved broadband customer churn as well.

Slide 11 shows some of the highlights of the rebrand of sudden linked to optimum to unify our marketing efforts and create a consistent customer and employee experience, which kicked off in earnest. This week.

I want to thank all the teams at LTC OSA for their tremendous work over the last few months preparing for the rebrand and generate tremendous excitement across the company for this huge milestone.

Additionally, we continue to expand our sales distribution channels to support improved customer growth.

We've already reached the lower end of our year end target for door to door sales head count and the number of new retail locations is due to ramp up in.

In the end into the end of the year as we execute on almost all of the required leases at this point.

Turning to slide 12 on business services revenue growth of one 3% in Q2, excluding air Strand revenue is in line with Q1, but below last year's level of growth as the year on year comparisons are normalizing after the peak negative impact we saw from the pandemic in 2020.

We continue to see positive customer trends, but we're not back yet to the activity levels in the SMB space that we saw prior to the pandemic.

And we're mindful that the economic backdrop today may delay a more material pickup in growth here.

SMB and other revenue grew one 8% ex air strands in Q2, and Lightpath revenue was flat however.

However, net sales bookings at Lightpath increased significantly again in Q2.

63% year over year benefiting from our recent network expansion new market launches and expanded sales force. We anticipate that this should also contribute to accelerated revenue growth in the coming quarters.

Slide 13 is a summary of our news and advertising business performance revenue grew one 1% in Q2 with year over year comparisons normalizing here as well the.

The auto sector remains weak, although we're starting to see some green shoots of recovery.

Remember, we expect some more political benefit this year in the second half given the midterm elections, but didn't see much of a pick up from this yet in Q2.

And now I'll hand, it over to Mike to review the financials in more detail.

Thank you Victor and good afternoon, everybody I'm, turning now to slide 15, with a summary of our financials for the quarter.

Our revenue declined two 1% in Q2 with adjusted EBITDA declining eight 8% with similar performance year to date.

Our adjusted EBITDA margin was 49% in Q2, which is three percentage points below the prior year quarter, reflecting higher operating cost to invest in some of the areas. We have outlined to drive better customer growth and higher medium to long term revenue and cash flow growth.

For example, as Dexter pointed out we have now reached over 400 door to door salespeople in over 100 retail stores and we are continuing to put marketing dollars behind our recent mobile converged offers and our rebrand campaign.

Our cash Capex was up 50% year over year, driven by increased fiber investment.

This all contributed to a 33, 2% reduction in our EBITDA less capex or operating free cash flow.

On Slide 16, you can see our capital intensity was 19, 7% in Q2 up from 12, 8% in the prior year quarter.

Without fiber and new home build growth investment capital intensity would have been nine 1%.

Our capex target in 2022 remains between $1 7 billion to $1 $8 billion on a cash basis, including $300 million to $400 million of additional FTE, GH, capex and $100 million to $200 million.

Of additional newbuild capex compared to the prior year.

Remember that after a couple of years of elevated capex to support our accelerated fiber rollout, we expect to start seeing significantly reduced capex. After 2024, once we start scaling back that built.

Yeah.

Yeah.

Slide 17 highlights the components of free cash flow in Q2 totaling $191 million for the quarter and about $400 million year to date, which is lower year over year, given all of our accelerated growth and vessels.

Cash interest was $253 million in Q2, which should be slightly higher in Q3 and Q4 given recent rate increases.

Cash taxes were elevated at $150 million in Q2, but we currently expect payments to be significantly significantly lower in the second half when compared to the first half of the year.

And lastly, other financing activity reflects continued debt paydown amounting to about $85 million for the quarter using excess free cash flow.

Finally on slide 18, we want to reiterate that we are a very well termed out debt majority profile following prior refinancing activity.

We have no annual bond maturities greater than $1 billion before 2025.

All of which could be covered by either free cash flow generation or capacity from CSC holdings revolving credit facility.

For example, we can easily cover the upcoming $650 million note maturing in September in this manner without any need to access the credit markets.

Last month, we entered into an amendment to our main CSC holdings revolving credit facility extending the maturity on an aggregate amount of $2 $3 billion.

Of our total revolver commitments to July 2027 at a rate equal to sulfur plus 235% per annum.

At the end of Q2, we had liquidity of approximately $2 billion.

On top of maintaining a healthy level of free cash flow generation.

The weighted average life of our debt is currently five nine years and our weighted average cost of debt is four 9%.

And as we demonstrated again with our recent revolving credit facility refinancing, we will continue to proactively and opportunistically manage our liabilities.

And with that we will now take any questions.

Thank you.

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Okay.

Our first question comes from Philip Cusick with Jpmorgan. Please go ahead.

Hey, guys. Thanks.

Two if I can first sector in the past you've talked about a potential return to growth at some point. This year on broadband subs is that still valid and if not what has to happen to get there and then second there is a lot of chatter in the market about a sale of assets can you give us some idea of where you might be in that process.

Thank you.

Thanks, Phil.

The first one yes.

We're doing all the right things strategically and operationally.

To invest back in the growth of our business.

I think we are confident that we will come back to growth I think the question is when.

We have.

But expecting to see that in the second half of this year I still think that we can start to see it in the second half this year.

But I don't think we can give you an indication as to when precisely we think that as of now, but we continue to see good improvements from an operational standpoint here that we see.

And expect to bear into fruition.

Positive net adds in the second half this year hopefully.

On the sale of assets.

I think theres been a lot of chatter out there I think we can confirm there is a process going on.

I don't think we want to comment any further than that.

Much like what we did win when there was a lot of chatter on Lightpath, who will update you and the rest of the market.

<unk>.

We deem appropriate to update.

But at this time Theres nothing more to really talk about.

Okay. Thanks, guys.

Our next question comes from Jonathan Chaplin with New Street. Please state your question.

Thanks, just following up.

On that.

From Phil can you give us a sense of the number of subscribers.

At Southern Linc best is optimum.

And the breakdown of EBITDA between <unk> and optimum.

Yes, Jonathan I think we're in a more in a sidetrack that a little bit I don't think were in a position to talk about the assets in detail I think we can confirm that we've received a lot of reverse inquiry.

For all or parts of the sudden link assets.

I don't think we want to get into a debate as to financial and operational Kpis in a public forum.

But.

All right.

<unk> have been out there historically on the asset. So I think you could probably with some with other analysts figure out broadly speaking what the numbers look like.

Got it okay. Thanks next year.

Our next question comes from Brett Feldman with Goldman Sachs. Please go ahead.

Yes, thanks for taking the question.

Some of your peers across telecom and cable we've heard discussions around inflationary cost pressures in some cases, a normalization of bad debt. Some of them are seeing longer collection times. I was just wondering can you give us an update to what extent at all or some of these macro pressures reflected in your trends this quarter or what's your outlook for that thank you.

Yes, I think from a inflationary pressure standpoint, clearly some of the obvious things like utilities.

Numbers can be quantified, we do we had seen pressure on labor.

And the early part of this year, there's probably less pressure on the labor side.

Day, which probably is indicative in terms of.

Some of our success in driving some of our distribution channel investments ahead of ahead of schedule.

But I think I think overall from an execution standpoint.

Our operating costs aren't meaningfully being.

Impacted by.

By inflationary pressures I think the utility number year to date is may be costing us an extra $10 million of utility costs today.

There is pressure in supply chains as everyone talks about whether it be.

Cps or fiber in itself, we feel good about where we are from a supply chain standpoint, given that we've been added for a couple of years here on fiber.

So we're clearly are going to run into I'm sure instances, where we wish we had more.

In the supply chain and we have but none of it is day is impacting our 2022 capital investment strategy in terms of being able to them to deploy and deliver what we expect to.

Brett you asked something else other than utilities.

Bad debt expense bad debt collection timeline and stuff like that I'll hand that to Mike to answer.

So we're seeing a little bit of deterioration in that space not a lot and I would I would point out this is deterioration versus the prior year when bad debt expense and non pay write offs were at historical all time lows I think we've always actually been.

We've ranked pretty well within among our peers in the industry in terms of bad debt as a percentage of revenue and that continues so mild pressure, but nothing of note.

So is this getting back to what you saw pre pandemic or is it trending a little worse.

No I would say its between somewhere between pre pandemic and the all time lows. We saw lesser I don't think were back to pre pandemic levels.

Thank you.

Our next question comes from Craig Moffett with Moffett Nathanson. Please go ahead.

Yes, hi.

I'd like to talk about wireless a little bit.

It looks like your numbers in wireless or at least starting to look a little bit more like others in the industry, but it represents 1% of your revenues versus <unk>.

Six at charter.

Can you talk about.

What youre seeing with wireless now that you seem to finally have the product that you wanted to sell all along.

And what impact it has on the rest of your business are you seeing churn reductions or are you seeing pull through in broadband and that sort of thing.

Yes, Craig it's a good question one obviously, we're focused on getting our.

A good product and our friends over at T mobile have been helpful on that.

Since effectively.

Close to the beginning of the year, we've had a good product out there.

Second was to get out.

And offer product and a marketing campaign that made sense, we've been working at that for the last couple of quarters and we're starting to see some fruition here, particularly also on the distribution side of our business.

Being able to push more channels theyre on the mobile side.

I think listen I think we continue to believe it's a good churn enhancer.

Theres not a lot of material data, we have here given that the inflection points on the acceleration of our mobile this year.

We're not into kind of those churn reduction statistics in terms of timeframes yet.

So we'll have a better view on the cohorts from the beginning of this year.

Better next year, but we don't anticipate seeing anything different than what we see from our peers in terms of.

Impacts on churn.

And those types of pull through characteristics.

I think what we we are.

Our attracting obviously.

Some of the lower pay tiers here.

With the one gig and the three gig over the five gig product depending on.

When we are delivering those.

We're seeing about a third of our our mix is.

On the.

Unlimited side, so very similar statistics that we see and we hear from from our cable peers. There. So maybe that we could give you a little bit more detail on financial impact and custom.

Customer impact in a couple of quarters as we look at some of these cohorts and provide you with some more detail.

Alright, thank you.

Our next question comes from could come around with RBC capital markets. Please state your question.

Great. Thanks for taking the questions I wanted to follow up on the asset monetization discussion, we typically talk about legacy southern link, but I was hoping to get your perspectives on the strategic value of legacy optimum.

Just given that it's the top DMA in.

Much further along in its fiber builds and if I could just circle back to the broadband trends.

You noted that the Q1 to Q2 trends.

This year was consistent with the average seasonality you saw pre pandemic.

I know, there's limited visibility at the moment, but just to level set and maybe how to think about next quarter I think the historical average seasonal benefit heading into Q3 has been about 4000 or so so sorry to get too specific but is that the right way to think about your near term expectations.

Good questions.

On the asset monetization side.

Yeah.

Maybe taking a step back.

Clearly, we've gotten a lot of.

Inquiry around the sudden like assets, which is why we are engaging and being responsive here.

It Shouldnt escape. The fact that we were embarking in are suddenly upgrade.

Over the next year.

And there and thereafter, which.

<unk> is a good time for us to pause here and look for potentially significantly accretive transactions for shareholders.

Before we embark on a big upgrades. So it's the right time for us to be looking at this.

Given where we are and our capital deployment.

The timeframe to your point.

Optimum is going to be pretty fully <unk> by the end of 2024.

And.

It has not escaped us that we believe that's going to be in.

Very very strategic asset going forward given its DMA.

But we are not engaged in a discussion around around that.

And.

We'll have that discussion in the future years.

I am sure, but that is not on the table today, but youre thinking about it right in terms of how.

Potential remain co would look like to the extent that we do do something with the sudden like assets.

On this quarter.

I think we're not in the business of commenting intra quarter.

That way.

I told my team earlier today that the statistic that they asked me to talk about on Q1 to Q2 is misleading from Q2 to Q3, because the numbers are a little bit all over the place from Q2 to Q3, you cited a 4000 number but theres also a 14000 number also out there.

Improvements so.

We went back three or four years.

Pre pandemic and they are a little bit all over the place going from Q2 to Q3, but very consistent going from Q1 to Q2. So I don't want to I don't want to preface what we're seeing in in Q3, particularly given that.

<unk> is seasonally typically the <unk>.

Worst or the second worst month of the year.

But then we tend to have the best months of the year being August and September so well.

We're just at the beginning of August and we will talk about this in our next quarter earnings.

Very helpful. Thank you.

Thank you and next question comes from James Ratcliffe with Evercore ISI. Please go ahead.

I have two if I could first of all you talked about broadband trends about seeing lower gross add activity can you just give us a sense of how you feel your share of gross adds are trending and particularly any difference in the areas, where you're marketing the fiber product versus where you don't have it.

And secondly.

Can you talk about scale and how much that matters at this point in the cable industry. I mean, historically, there was a big advantage to absolute scale assists in terms of programming negotiation leverage is that as big a deal.

Thanks.

It's interesting on our on the overall landscape.

We see lower activity on.

On the gross add side in the historic Cablevision footprint in the east.

But we still continue to see very robust.

Gross add activity and suddenly footprint, where we see churn differential.

We see churn in the east being.

Very stable, but in the west being a lot higher because of competitive pressures right. So it's.

It's a little bit we see two different.

Topography is in terms of our footprint.

In terms of the jump ball Yeah. We're I think we're performing well in terms of jump balls, we've got very competitive products.

Relative to to files, which is that the key peer for us in the east.

We see ourselves.

Across the board as a better economic proposition relative to <unk>. If you look at the bundles are bundles versus their bundles.

And clearly in our fiber footprint, which today is $1 6 million homes.

Growing to anywhere from 2.3, plus by the end of this year in the east.

We will start start being a differentiating factor we believe.

And those jump balls in the west we don't have the fiber product and we are we are seeing competitive pressures from fiber overbuild or a certain part of our markets.

And then clearly even though we can't put our finger on it specifically on the churn activity relating to SWA, but we're certain that <unk> is impacting.

In particular are suddenly footprint out there.

The scale matter.

It does.

Sure.

Because of two things one you mentioned programming, which.

Which is key but secondly relative to your marketing and distribution efforts it's key.

And we see that in the sudden link footprint, where it's difficult to to harmonize our sense.

Central and centralized marketing and distribution efforts when youre in a lot of disparate smaller communities.

Out there and so as scale does matter.

From efficiencies in marketing.

Distribution.

To your point in efficiencies of programming costs.

Thank you.

Our next question comes from Peter <unk> with Wolfe Research. Please state your question.

Hi, Thank you I have a question about.

Trends in sudden Lincoln another about fiber.

Suddenly I'm curious if you could comment on changes competitively.

Resulting from churn or just the size of the gross add Paul I heard your comment just a couple of minutes ago about the impact of <unk>.

Fixed wireless and possibly on churn and for another operators to churn is stable. So wondering how churn and gross adds are trimming you suddenly come in on fiber I'm wondering how your cost per home passed.

Trending.

And whether it includes capex for the drop in the install thank you.

So I just Peter to reiterate kind of what I just had a couple of minutes ago.

I think we are seeing two different trends I know that our peers, particularly our larger peers.

Talk about more than a national.

Trends, we see two very different types of trends in two different types of topography.

Where we don't we don't see lower activity from a gross adds standpoint.

In our suddenly footprint.

It's marginally.

In the thousands maybe different so it's negligible in terms of actual numerical numbers relative to last year on gross adds but we do see an uptick in churn.

Due to competitive.

Competitive environment, whether it be <unk> SWA or fiber overbuild.

We could we can isolate to the markets, where we see fiber overbuild or is.

And I'd tell you that we have incremental churn.

That probably leads to a.

A majority of the impact that we're seeing and suddenly going to on a quarterly basis. So.

It has not escaped us at all and then the impacted SWA.

We can't put our finger on it exactly.

There may be hitting in which markets because most of our markets in sudden link are exposed to SWA.

But we do see the same gross add activity, but we do see higher churn so.

It must be coming.

Some is coming from the competitive pressures of FW way.

We just can isolate it a lot closer.

Because of the different topography is we have than our peers.

Certain of our peers are seeing the same trends, we are depending on weather and urban areas of rural areas.

In a more urban areas, which is which is on the optimum side, our gross add activity is lower.

But our churn is very stable.

In our more urban areas is a lot lower than it is in sudden link in terms of what we think the technology can do and where it is and where we think it's marketed.

So hopefully that gives you a little bit of insight.

On the cost per homes past.

In the East I think we've been public around that 500 $550 number and.

In terms of the average cost sometimes its more expensive, sometimes it's a lot less expensive it depends on MD use.

Walt less expensive aerial and then if there is engineering work, obviously, it's more expensive, but we're averaging about 500 to 550 <unk>.

That does not include the drop.

And does not include the CPE costs that really cost is is.

As the passing but not the installation process.

Thanks really helpful answers.

Our next question comes from Kannan Venkat to shore with Barclays. Please state your question.

Thank you.

The next or maybe a couple big.

The tier ones.

When we think about the.

Fixed wireless.

As as a competitive threat at $70 or more broadly across the country.

Given the success of the products, having I mean does it make you rethink the fiber investments.

If.

<unk>, an inferior product is able to take share from yield despite investment in fiber.

Is that any kind of a threshold in terms of.

<unk>.

That's one part.

The question and the second one.

It's more about the strategic intent when or if these entered the U S.

I mean at that point.

Thinking about all the pieces in pensions and <unk>.

Potentially scaling up and becoming significantly bigger now.

Now we are talking about completely different.

Attunity is in <unk>.

Monetizing suddenly potentially optimum and so on.

Yeah.

Is this multi modal upswing in the towel on the U S market color.

Are we thinking about this wrong.

On the first one I think I think I'd answer it the exact opposite way than you asked it which is.

The <unk> product.

Which is tends to be a up to 300 Meg type product.

Exact reason why fiber is so powerful going forward.

I think it's not escaped our friends in the <unk> World that there is a.

A short runway potentially for the product in terms of its lifecycle given its limitations in terms of delivery.

And so the upgrades that youre seeing in fiber across the country, whether it's ourselves or other people or even the investments of some of our peers in DOCSIS four <unk> zero is going to crystallize.

Inferiority of the product <unk>, so it's a temporary.

Perspective.

In our view that we're going to see market share losses.

Across the board and FWS, but.

As you see in our average speeds taken were at the <unk>.

600 <unk>.

EBITDA on average with a big chunk of our people doing people doing one <unk> and above.

And the average speeds are about 400.

Meg right. So we're already surpassing.

The capabilities of what <unk> can do.

And so we're going to do the inverse as to what you suggested which is.

Not and stop doing our fiber to accelerate our fiber.

Because that is the.

That is the strategic goal is to be able to deliver the best product.

With the best bandwidth and speeds and experience.

Which will then lead us to have a significant cost to serve advantage over our peers and.

And deliver great free cash flow returns and going forward. So.

That's the way, we think about the FWS threat.

In terms of strategy you.

You're right, we would have loved to have acquired a lot more things out there.

There's been nothing for sale.

So and the competitive dynamics have changed.

In many respects relative to the thesis five or six years ago, when we did come to the market.

I don't think that looking at <unk>.

Very accretive transaction for our shareholders is.

It equates to throwing the towel I think thats the right thing for us to be doing.

And I have not suggested in.

One ounce of my commentary that we're thinking about selling the optimum footprint at Cablevision I. Just said I think we're we think it's a very strategic asset going forward.

And we will see it at that but I think it's.

It's fair to say that if you look at.

The history of the investments of the group globally, we've never really exited countries.

But you have to adapt to the topography that you're dealing with and the competitiveness that you're dealing within the players.

And try and maximize shareholder value any which way you can depending on the different dynamics that change.

Year over year or quarter over quarter. So I think we're addressing that as.

As best we can today.

Alright. Thanks.

Okay.

Thank you art.

Our next question comes from Frank.

Loosen with Raymond James Please state your question.

Hey, guys, it's Rob one for Frank.

<unk> spoken to this a bit earlier, but it wasn't a sudden link leibrand. Originally slated for early August or was that accelerated and if it was accelerated can you talk about what drove that acceleration. Thank you.

Yes. It was always slated for early August .

I don't know how many rebrand you've done but this is probably one of my first ones and the frustration that you have to do in terms of the planning is an unreal. So.

It's been methodically been put in place for the last nine months in terms of the pacing the investments and the market's heading the different <unk>.

Distribution and media criteria that we're doing in all the different things that you can think about in a rebrand from uniforms trucks to labeling of equipment and those types of things. So this has always been slated.

People have been asking US is why are you doing a rebrand if you are engaging in strategic discussions because the strategic discussions may amount to nothing.

And we know we're going to continue to run the business as usual.

Until.

Until we don't have to right. So.

We definitely need to continue to do what we had planned to do from a budgetary standpoint from a strategic standpoint.

Earlier in the year and what we announced at the end of last year.

And we will continue to do that until we have something else to talk about relative to the sudden link assets.

Yes, it makes perfect sense. Thank you.

Our next question comes from Steven Cahall with Wells Fargo. Please state your question.

Thanks.

Just wondering if the reduction in gross adds and net adds that you and others are seeing causes you to revise the way you think about your penetration assumptions either for the fiber rollout or the newbuild activity I'm, just trying to figure out if the growth slowdown as market wide and sort of regardless of technology, that's going to market or if it really is very specific to <unk>.

Technologies and so fiber.

And things like fiber can continue to kind of have that same penetration pattern that you've historically seen and then just as a quick follow up wondering what mobile capex is baked into the current guidance and is that something you think will kind of be steady over time are up or down.

So on the fiber side I think we continue to believe that.

Pound for pound.

Fiber versus any technology, whether it be HFC or other types of technology is going to be the majority winner of market share.

Going forward so.

We see that in in the early stats, we see that in other markets.

Across the world.

And I think the only difference that.

That people have paused for is maybe.

The return characteristics of some of the smaller fiber operators.

<unk> changed dramatically in the last 12 months.

Either it be competitive pressures driving lower our crews on the gross add side, whether it be inflationary pressures on opex.

Whether it be supply chain issues in terms of execution.

Which is I think we know why we feel good about where we are in the fiber rollout because of the size.

We are able to negate a lot of those those those issues, particularly.

Particularly with the cash flow is being generated from the HFC product as well so.

We feel <unk>.

We feel as good and there's a lot of consultants out there that throw around different penetration levels out there.

But I think it's fair to say that we feel good about.

About the penetration numbers that we expect as well as the return on investment that we're going to deliver.

On mobile Capex, there is no mobile capex.

Great. Thank you.

Our next question comes from Ben Swinburne with Morgan Stanley . Please go ahead.

Hey, good afternoon guys.

So you made a couple of comments earlier about sort of accelerating the pace of fiber I wanted to come back to that can you just talk about your expectations for.

Both the second half of the year are you still expecting to hit that $2 5 million number by the end of the year in terms of the organization's ability to cater to ramp that given all of the.

There's a lot of red tape involved and construction et cetera, and same thing on the installation side. It sounded like you expect fiber net adds to accelerate in the second half from the second quarter level I, just wanted to come back and check that and see if you could just sort of flesh that out for us a little bit and then I just had a quick follow up on the mobile front.

Yes, I mean listen I will tell you.

Ben.

Our budgetary process.

Last year was targeting to do about 1 million homes passed in fiber.

900000 in the east and 100000 in bps involves across the west.

We're trying to re forecast that 212 to $1 three type numbers.

For this year I don't know, whether we get there we're clearly beat the 1 million homes.

I suspect we will get to the one two I don't know, whether we get to the one three alright. So.

We're on pace, we're accelerating because we know that the quicker we do it.

The better off the better we are for it whether that be in terms of being able to.

To get new customers on board or migrating customers and reducing our cost to serve or just to being able to get ahead of any potential inflationary pressures that we may see in the system if we delay.

One thing Thats, helping us is that the state of New York and New Jersey have been.

Very helpful on the permit side over the last kind of six months.

So we've been releasing big big swaths of of areas.

Particularly in New York.

Where where the Governor's office and the Dod has been very helpful. There.

So that's really helping us.

Accelerating so we're going to try to accelerate what we had planned in you see it in the slides.

For 2023, hopefully will do more than what we anticipate in 2023 than it was on the slides and try and do it quicker than anticipated.

From an organizational standpoint I think.

Were there right.

Sure.

July has been the.

A great month again Q3 is going to be.

We expect it to be knock on wood, a materially better than Q2 in terms of our delivery of homes passed.

And so this is something that we monitor very very very very closely on almost on a daily basis.

As to as to the progress so where they are from an organizational standpoint.

To be able to do and again from an installation standpoint as well we have.

We've put the resources in place.

To prioritize as much the gross add side as the migration side.

And we keep on getting better and better on the migration side. There is a lot more.

A related stuff and experienced related issues to migrate someone then to gross add someone the gross add side. It's been great. The migration side has teething issues, but as you've seen in our numbers, we're accelerating the migrations and we will continue to accelerate those too.

To year end I don't know, where we're going to end up at year end, but I'd like to get to as close to 200000 as possible.

In terms of <unk>.

Fiber subscribers and then materially move that number in 2023.

Got it and then just on wireless you guys have gotten more aggressive in the marketplace. That's translating nicely into volume growth. How are you thinking about sort of that using wireless to drive broadband versus generating meaningful EBITDA out of the wireless business and I don't know how much you can tell us about sort of the unit economics.

Or at least what kind of service ARPA as you said that youre expecting in that business here as you look out over the next couple of quarters and years. So what's what's your philosophy on using mobile in the marketplace.

I mean listen I think youre seeing some of the.

<unk>.

The.

The mobile peers using using fixed as a driver for mobile right.

And obviously the inverse is the case for the cable operators tried to use mobile to drive fixed.

And that's no surprise to anyone I think we want to keep the discipline on economics, but we're.

Not selling negative gross margin products and we're driving positive EBITDA.

But clearly we look at it in terms of customer gross margin as opposed to product gross margin right. So if we can continue to drive growth and customer gross margin and customers period and volume.

The way and you can you can think about mobile as a netflix subscription or a gift card or.

Or something like that in different promotional periods.

But overall, we're always looking for.

Growing our gross margin per customer.

Yes.

Yes.

Our next question comes from Bryan Kraft with Deutsche Bank. Please go ahead.

Hi, good afternoon.

If you don't mind I guess first once you work through the re ramp in your sales channels or we get into next year, what's the right way to think about broadband <unk> growth in 2023 and beyond do you see it returning to mid single digit range or do you think that's too aggressive given the competitive environment.

And then I'll.

Also wanted to ask about Lightpath, you mentioned that light paths that sales bookings increased by 63%.

Sounds like a lot could you help us contextualize that in terms of how much we could expect growth in light path to accelerate thank you.

Listen I think on the <unk> side going into.

Our heavy end of the year promotion last year and going into this year I think people were worried that we were going to see negative impact on broadband <unk>.

As you've seen in our numbers, we've continued to grow our broadband <unk>.

It's not mid single digits, it's low single digits.

But we're confident that we're going to be able to continue to push.

Broadband ARPA growth, but clearly in that and that more of that lower single digit numbers is what we should be pushing for.

At this stage given the mix given the promotional aspects of business.

That we're seeing.

Till we get to the levels where.

Our churn reduction.

Material, particularly with our fiber product.

We will we will sit there and continuing to fight on on a day to day basis.

From a promotional standpoint, which will which will cap.

Broadband <unk> in the near term going from going higher than lower low single digit growth at this stage.

On the second point did you ask a second question I'm, sorry like that sorry.

The numbers are small.

Because.

Order entries take.

Six to 12 months to actually execute and turn to revenue.

But I think it's it's material insofar as we are right now kind of flat in revenue growth.

But if we were to install these types of numbers over the next six to 12 months.

You should kind of look to kind of mid single digit growth on lightpath product.

Okay got it thank you very much.

Our next question comes from Doug Mitchell with Credit Suisse. Please go ahead.

Oh, Thanks for squeezing me in so two questions. One I just wanted to clarify Dexter the comment on <unk>.

50% over 50% penetrations, where are you.

You have both fiber and coax.

It seems like a big deal I'm, just trying to understand you are building out fiber, where you compete with fiber and if those.

Penetrations grown since you've launched.

Fiber or is that where you're over 50% already and you think you can defend that number I'm just trying to get some more context around that over 50% penetration with us and improvements since you launched fiber or not and then you also.

Dexter I'm, just wondering private market values for cable must be.

Quite a nice thing for you to start a process.

On asset sales in cable valuations are a long term lows do you have any perspective talking with a lot of potential buyers I imagine as to what explains the gap between public and private valley.

Valuations for cable assets, it seems about as wide as I've ever seen them. Thanks.

Thanks for your help.

On the first one you are right. Your second comment you're right, which is that's where that's where our percentages where we're over 50% in the areas, which was first launched fiber. So we are we're very confident being able to maintain those types of market shares.

I think the thesis is clear as we are competing against fiber today in the <unk> product.

But we are.

Competing against a.

Our fiber technology, which is <unk>.

Meaningfully today inferior to the ex U S politics that technology right.

It's our belief that is going to take our friends over at Verizon Many many years to catch up.

In terms of the investments.

In order to be able to duplicate.

The speeds and the experience that we're able to provide so we believe that.

Once we're able to get critical mass.

To get the installation processes.

Down Pat get the migrations perfected.

We think we can actually gain market share back in the optimum footprint.

So that remains to be seen today, obviously, we have a.

<unk>.

And fee or your mobile.

Our market share.

<unk> and Verizon very good at using that.

That dominant mobile position in the northeast to its advantage but.

We think we deliver a great mobile product I think our peers believe that as well and we're very competitive from a price standpoint.

The more attractive.

So we do believe that we will be able to over time take market share.

Back in many areas with the delivery of fiber.

Your second question.

Multiples are.

I'm the wrong person to ask.

I should ask yourself.

Listen.

There is a lot of a lot to be said that.

The private market multiples when youre thinking longer term.

When you can lever assets in it.

Private context.

Meaningfully higher numbers in Youku on a public context.

Drives drives higher valuations I think there is it is clear.

In our minds.

That.

Synergize.

For strategic the private market multiples are high.

And then on top of that if you think about some of the financial.

Cost of capital of some of these funds out there.

Their cost of capital is probably lower than than the public markets.

And so.

And there are more patients and so I think that that's what's driving our continued interest from a private market side in higher numbers, which is obviously why where we.

We are being reactive because we think that there could be some very accretive transactions out there for shareholders.

If.

If we're right in terms of the way we're thinking about.

How about this process.

Alright, thank you.

Thank you. Our next question comes from Matthew Harrigan with benchmark. Please go ahead.

Thank you.

<unk> been pretty adamant in talking about your commitments in the New York Metro market and the value there how much of that could stem from our perspective than the long term your fiber.

Tumor side is really going to have a lot more apps.

Visibility.

And to that in terms of just really getting the revenues up much higher as the log casuals foreign.

Even horizon it feels like you're in a good position right now, but what is it that makes you very committed to New York versus say the sudden like markets. Thank you.

I think you hit it on the nose not that's good to hear from you is.

We've got a we've got a strong competitor that we've got a lot of respect for.

That is a two player market.

<unk>.

And putting aside SWA and other potentially technologies out there.

When you've got two fiber players or even if we believe our fiber is a lot better in terms of our products. That's call. It $1 75 fiber players out there that competitive dynamic is is something I would sign up for for every single one of our markets in the long term right.

And.

The demographics are attractive.

The population economics are attractive.

The competitive environment is stable.

And.

It's very strategic from a footprint standpoint.

For many third parties in the future.

So knowing that and knowing that <unk> got a fully fibroids asset.

In the wealthiest part of the country and the largest DMA.

We believe that has a lot of strategic value and it's not that the economics are bad and other parts of the country. It's just that we are already super advanced in terms of our fiber rollout.

And in the optimum footprint.

And we know.

How to execute and the cost to execute there no surprises over the next couple of years.

And then we're done.

So the free cash flow dynamics are are impressive on top of it being a very strategic asset.

Thanks, Chris.

Thank you there are no further questions at this time I will turn it back to management for any closing remarks.

Thank you for joining do let us know if you'd like to follow up with us on any questions otherwise, we'll speak to you in the coming weeks. Thank you.

Thank you. This concludes today's call all parties may disconnect have a good evening.