Q3 2022 Altice USA Inc Earnings Call
[music].
Hello, and welcome to the Altice USA Q3, 2022 earnings conference call and webcast. 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. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
It's now my pleasure to turn the call over to Nick Brown. Please go ahead.
Hello, everyone. Thanks for joining today, we're joined by our Pes USA Executive Chairman next to Gary and CFA might grow and we are delighted to introduce our new CEO Dennis Matthew It's again it would take you through the presentation and then we'll have time for Q&A.
As today's presentation may contain forward looking statements. Please read the disclaimer on slide two.
Next item. Please go ahead.
Hello, everyone I'm kicking off with the summary of our third quarter performance on slide three.
Revenue declined 7% year over year, mainly driven by pressure in our residential and advertising businesses as.
As well as the loss of <unk> revenue in the prior year after the termination of our legacy sprint contract <unk>.
Excluding <unk> revenue the revenue decline would have been just four 3% year over year.
Q3, adjusted EBITDA declined 18, 1% year over year with a margin of 39, 9% or down 12, 7%, excluding air surround revenue, reflecting both the revenue decline and higher opex to drive future growth.
Residential broadband customer net losses were 43000 for Q3, which was relatively in line with the loss in Q2, as a lower market activity environment and current competitive pressures impacted the pace at which our growth initiatives are materializing.
Free cash flow remains solid even with our elevated fiber investments generating $136 million in Q3 and $535 million to date.
Our optimum fiber network deployment continues to accelerate rolling out at the fastest quarterly pace to date, adding 321000, new fiber passing in the quarter.
We also added 31000 fiber customers in Q3 and expect to continue to grow at an accelerated pace through both gross additions and migrations of existing customers to our fiber network.
We continue to advance the pace of our new builds and expand our sales distribution channels, including the opening of several more optimum stores across the country, both of which support future customer growth and.
And finally I'd like to welcome our new CEO , Dennis Matthew Pro formally joined US exactly one month ago today.
Before I turn it over to Dennis I want to share that leading altice USA has been the most rewarding experience in my career and I could not be proud of what we accomplished together thanks to the leadership and the thousands of dedicated employees across the country to enthusiastically serve our customers and communities every day.
The decision to step away from the CEO role at this time was a difficult one but based on personal reasons as my family and I would like to move back to Europe .
But having found dentists would take to take the reins at Altice USA I couldnt be more optimistic about the company's future and I'm confident is in good hands.
Dennis is a great operator with a proven track record an exceptional leader and team player and just a few short weeks has acclimated incredibly well across the LTC leadership team frontline workforce and broader organization.
As we look ahead following the transition period. We're in now I will remain involved with LTC USA as executive chairman with a focus on strategic opportunities for the company.
With that I'd like to hand, this over to Dennis to safety words about himself.
Thanks, so much Dexter.
Very excited to join <unk> and the role of CEO at this important juncture for the company.
And I see immense potential to further connect with and serve customers, while elevating the company as the broadband provider of choice.
And by way of background I have nearly 18 years of experience at Comcast previously leading some of the company's largest regions in the East Coast. Most recently was the freedom region, which includes areas of Pennsylvania, and New Jersey, and Northern Delaware and so my goal is to position Altice USA as a best in class broadband.
<unk> with a focus on operational excellence and customer experience in my first 30 days Ive had the opportunity to spend time on the ground with frontline teammates hold deep strategy sessions with the leadership team here and meet employees throughout the organization to start discussing areas, where we can deliver a stronger employee and customer.
Customer experience and so I'm proud to lead such an innovative company that has the right vision and long term strategy centered on investments in fiber infrastructure and a superior customer experience I will give you more of an update on where we are with fiber and the newbuild initiatives in a few moments, but first I'd like to hand, it back to Dexter.
To take you through the headline Q3 performance in a bit more detail.
Thank you Dennis moving to slide four showing revenue trends in more detail.
Total reported revenue in Q3 declined 7% year over year, mainly due to a decline in our residential business, a four 4% and our news and advertising business, which declined 16, 1%, which I'll come back to in a moment.
Total revenue was down four 3%, excluding about $75 million of prior year <unk> revenue.
In Q4, we will have another $36 million of lost are striking revenue year over year remember, we had approximately $120 million of <unk> revenue for the full year in 2021, which we will not see in 2022.
Business services revenue in Q3 was down 16, 8% year over year on a reported basis, but flat. Excluding this are strained revenue.
Turning to slide five on Q3 customer trends in our residential business.
We reported a net loss of 50000 residential customer relationships and broadband net loss of 43000.
While we typically see seasonal returned to school benefits in Q3, when comparing to Q2, we are still experiencing higher competition in parts of our footprint.
It's clear that fixed wireless broadband is taking some of the growth in switches out of the market in the past few quarters given.
Given the growth from these operators as well as some localized pressure from fiber overbuild.
This is on top of the observing general low lower market and move activity and some households, moving back to mobile only solution since the pandemic.
We firmly believe that we're on track to improve these trends and returned to broadband growth through our growth investments inclusive of our fiber deployment and multi gig speed launches custom.
Customer experience improvements newbuild expansion and distribution channel investment.
Separately, we continue to see positive trends in our mobile business, adding 5000 mobile lines this quarter, which the slowdown from the previous quarter as we discontinued some of our service promotions.
Slide six is an overview of our business segments.
Revenue.
Revenue declined 16, 8% in Q3, excluding are strong revenue revenue was flat year over year.
Similar to our residential business. The SMB market is also seeing some impact from incremental competition and revenue for the quarter was also impacted by a carrier price down and our entire enterprise business.
Once we lap the air stride revenue impacts we are still mindful that an economic slowdown may delay a more material pickup in growth here.
SMB and other revenue was flat ex air strength in Q3, and Lightpath revenue grew <unk>, 5%.
<unk> recently announced an additional footprint expansion with the entrants into the Miami market with 135 mile fiber network build.
Light pass entrants into Miami, we will kick off with a 55 miles subterranean network a brand new high count fiber that will be ready in early 2023.
This comes as the second major East coast market that Lightpath has entered into over the past 16 months following Boston in June of 2021.
Yeah.
Slide seven is a summary of our news and advertising business performance.
Revenue was down 16, 1% in Q3, driven by a couple of factors.
First some of the expected political revenue for this year will be more weighted to Q4 than Q3 for us.
Second we had a couple of larger non political campaigns contributing to revenue in the prior year, which did not occur this year.
In addition, we continue to start seeing some campaign cancellations at the end of the quarter as the AD market retreated given the macroeconomic environment.
As one of the bigger drivers, where we are starting to see auto spend pick up although it is slow and recovery.
Now I'd like to pass it back to Dennis to update you on the fiber build and the Newbuild expansion.
So much Dexter I'm, a big believer in fiber is the best broadband technology that exists today. So that's a key tenant of the L. T strategy, which I'm very optimistic about with that in mind I'm pleased to say I'm very pleased on slide eight to present, a current snapshot of our progress with our fiber build in customer trends we've released.
An incremental 321000 fiber passing during Q3, reaching a total of $1 9 million passing this is the highest ever number of additional quarterly fiber passing altice USA has ever achieved.
We expect fiber passing in the fourth quarter will be at a slower pace as we experienced colder weather, which tends to slow down the construction, but will end the year well over 2 million cumulative fiber passing at the bottom of the slide you'll see our quarterly fiber customer net additions, which also accelerated to 31000.
Q3, as we've been marketing the fiber product across a wider footprint supporting gross adds as well as doing voluntary migrations of existing customers at the end of September we had a total of 135000 customers on the fiber network and to support our fiber strategy optimum recently introduced symmetric.
<unk> two gig and five gig fiber internet speed tiers for the first time, which is significantly faster speeds than our main residential competitors.
Multi gig speeds are now offered across all of long island, and Connecticut and will be available.
We'll be available everywhere, we have fiber by Q1 23.
Importantly, let me highlight some stats that underscore the long term benefit of fiber fiber trends indicate a significantly better experience for our broadband customers on our fiber network compared to our customers on our HFC network, specifically, we're seeing meaningful NPS improvement, 12% higher our pool.
And about 5% to six percentage points of annualized improved churn benefits. This makes us even more optimistic and confident in our fiber play and expectations for growth.
On slide nine you can see the company added 52000, Newbuild pass things in Q3, and 152000 past year to date, putting us well on track to add approximately 175000 pass things organically this year.
Mostly edging out the legacy southern look who southern linc footprint footprint, and we're consistently achieving over 40% penetration. After the first year of expanding our network into new areas, which is a key driver for new customer growth.
Additionally, broadband subsidy programs will enable us to accelerate new builds even faster in the coming quarters.
We've received awards for 35000, new homes year to date totaling $44 million and in Q3, we were awarded 9000 passengers in West, Virginia, and 2000 passengers in North Carolina will continue to actively apply to additional grant programs and we're excited for the.
<unk> to be a trusted partner to the local governments to bring broadband to unserved and underserved communities.
Slide 10 illustrates the long runway, we have to sell faster and faster broadband services that can support high levels of future data usage. The average download speeds customers take across our total base was 391 megabits per second as of Q3, but our fiber customers are taking two.
Miss these speeds on average our one gig customer penetration increased to 19% in Q3, which continues to grow every quarter.
142% of our customer base have speeds of 200, megabits per second or lower which represents a big opportunity to keep selling 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 500.
76 gigabytes in Q3, mostly driven by video streaming in Q3 about 15% of our base of broadband only customers are using more than one terabyte of data per month.
And within our fiber base about one quarter of our customers are using more than one terabyte of data each month.
Fiber is the best technology to support this growth trend toward increasing data usage demands with physician, which positions us really well and with that I'll hand, it over to Mike to review the financials in more detail.
Thank you Dennis and I do want to add to the warm welcome. So we're certainly very happy to have you join us here at Altice USA.
Good afternoon, everybody I'm going to pick it up on slide 13, with a summary of our financials for the quarter.
Our revenue declined 7% year over year in Q3 with adjusted EBITDA declining 18, 1%.
Excluding <unk> revenue from the prior year period total revenue was down four 3% and adjusted EBITDA down 12, 7%.
On a year to date basis, excluding <unk> revenue was down two 8% and adjusted EBITDA down nine 5%.
Our adjusted EBITDA margin was just under 40% in Q3, which reflects higher operating costs as part of our investment plans to drive better customer growth and higher medium to long term revenue and cash flow growth.
Our cash Capex was up approximately 60% year over year, driven by increased fiber investments.
This all contributed to a 46% reduction in our EBITDA less capex or operating free cash flow.
Slide 14 is an overview of our capex.
Capital intensity was $21, 26% in Q3 up from 12% in the prior year quarter.
Without fiber and new home builds growth investment capital intensity would have been 10, 5%.
Year to date, we've spent about $1 4 billion of cash Capex, our full year target remains between $1 7 billion and $1 $8 billion on a cash basis.
Remember that after a couple of years of elevated capex to support our accelerated fiber rollout, we do expect to start seeing significantly reduced capex. Once we start scaling back to bill.
Turning next to slide 15, which shows the bridge of free cash flow in the third quarter.
Free cash flow for the quarter was $136 million and was $535 million year to date.
Which is lower year over year, given all of our accelerated growth investments.
Note that excluding our investment in <unk> free cash flow would have been over $1 billion year to date.
Our cash interest payments were $348 million in the third quarter, which was slightly higher than previous quarters. Given recent rate increases, although 77% of our current debt is at a fixed rate.
Cash taxes were $30 million in Q3, and we do not expect any material cash tax payments in Q4.
Lastly, other financing activities reflects continued debt pay down amounts to about $114 million for the quarter.
We repaid the $650 million 578 notes in September with our revolving credit facility and had been subsequently paying down the revolver with excess free cash flow.
Okay.
Finally on slide 16, I want to highlight again that our debt maturity profile is well positioned with turns out maturities following prior refinancing activities.
We have no annual bond and term loan maturities greater than $1 billion before 2025, all of which can be covered by either free cash flow generation or capacity from CSC holdings revolving credit facility without any need to access the credit markets.
If you recall last quarter, we entered we entered into an amendment to our main CSC holdings revolving credit facilities.
Pending the approximately $2 5 billion dollar maturity to July 2027 at a rate equal to sofa plus to three 5% per annum.
At the end of Q3, we had liquidity of approximately $1 $4 billion on top of maintaining a healthy level of free cash flow generation.
The weighted average life of our debt is currently five eight years and our weighted average cost of debt is five 1%.
Again, we remain very well positioned in our debt maturity schedule and we will continue to proactively and opportunistically manage our liabilities.
When we think it is appropriate to do so.
And with that we will now take any questions.
Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment may be necessary to pick up your handset.
Before pressing star one one moment, please while we poll for questions.
Our first question today is coming from Phil Cusick from Jpmorgan. Your line is now live.
Hi, guys. Thank you.
Yes, welcome aboard Dexter. Thanks for your help you know Dennis I thought maybe it would make sense to start first of all with now what do you see in the first month opportunities and threats in the optimum versus southern link markets and I can't help but follow up on your comment about fiber being the greatest technology.
Given your recent history at Comcast, where the company is very wedded to the DOCSIS path can you think about well out loud how the companies maybe ever in a different situation or do you think this is sort of an inevitable move towards fiber over time.
Yeah.
Thank you so much for the questions over the last 30 days I've been deeply focused on strategy and bus budget sessions.
With Mike and the executive leadership team here and meeting the various teams and our employees across the whole business and what's clear to me is that the company has made a lot of progress in setting a strong foundation for our best quality broadband through the deployment of five of its fiber strategy. The launch of multi gig speeds in the rebate brands of <unk>.
One brand and I'm really a big believer that fiber is the best technology that exists today. So that is a hallmark of the <unk> strategy that I'm actually very optimistic about as I look ahead, I think we need to focus on disciplined execution and customer experience in order to maximize our investments.
A return to broadband growth. So I do think that there are areas, where we can accelerate such as with our go to market strategy aligning our product portfolio I'm looking deeply at our packaging and our offers and how we can continue to ramp up sales and marketing machines to get us back to sustainable growth and.
I'm looking forward to working with the team to making that happen.
Yeah.
Any further questions Phil.
Okay.
Yes.
I guess, if I can follow up there.
As you look strategically at the business any thoughts of your own on the process of selling southern link which was out there for a little while.
I know the credit markets are a little tougher or is that still in process.
You know I'm going to pass that to Dexter who is involved in our strategic initiatives. So I'll, let him fill.
We've been pretty consistent on these calls and saying that we'll update the market.
When we have something to update the market on I think it's fair to say that we're getting to a two.
To a place where the decisions.
Imminent as to whether or not we're going to do something or not on that but I won't comment any further than that and we'll update the market appropriately.
Thanks, Operator next question. Please thanks very much.
Thank you. Your next question is coming from Craig Moffett from Moffett Matheson SUV. Your line is now live.
Hi, Thank you and Dennis let me add my congratulations and extra let me.
Add my thanks for for working with you over the past few years.
Two questions, if I could I'm going to stay with some of the same themes.
First.
Okay.
Dennis I guess, what's your early thinking about broadband pricing.
Dexter you said, a while back that you were taking a strategic look at your pricing strategies.
I Wonder as you as you come in Dennis how you think about it.
The broadband pricing situation at Al <unk>, and and what you think the prospects are to continue to grow ARPA, which essentially was was down this quarter.
It's fairly significantly.
And then second I know you can't comment too much on the on a possible sudden linked transaction, but can you at least discuss the thinking behind potentially.
Potentially selling it in parts rather than than all of it is that driven by where the demand side of the market is or was that something you saw about pieces that you wanted to hang on to.
So I'll I'll again, I'll, let <unk> address the sudden link piece, but on the pricing. This is a part of my assessment as I go through the budget process with the team.
Looking at rate card I'm looking at the offers we have in the marketplace.
And how we can evolve our go to market strategy and so that's a critical area of focus for me I'm looking at our pricing opportunities.
With fiber as we continue to deploy fiber and so as we solidify our budget will be.
Taken a deep look and making some decisions quickly.
Craig I think on the on the sudden link side I think that was being responsive to inquiries.
We would have received.
In terms of the size of the overall operation and the disparate nature of the geographies.
And so we had some inquiries along pieces of it as opposed to the whole thing across.
Multiple players and so we were being responsive that way too to a piecemeal versus a whole company solution.
Thanks.
Thanks, a lot alright. Thanks, Craig next question. Please our next question is coming from Doug Mitchelson from Credit Suisse. Your line is now live.
Thanks, so much and sorry for hopping on the M&A side, but.
I'm just curious to ask if you have a perspective on the strategic importance of smaller markets versus larger markets not necessarily the sudden like process itself, but just over time, yeah, a lot of experience of Comcast at all sizes of markets. Typically when you think about cable is a scale business, but obviously in the New York footprint you have super scale.
And the economics can be different I mean, do you find a lot.
Mark it's more attractive than smaller markets or anything interesting there and then and then separately. The extra I know you know focused on strategy I think what we've been hearing the last couple of quarters is focuses on debt pay down you're obviously still free cash flow positive Ah you know is there any flexibility for tuck ins or should we continue to think.
That while you're going through the fiber overbuild, your hunkering down and focused on debt pay down. Thank you.
Ladies and gentlemen, please standby our speakers will be rejoining us momentarily once again, ladies and gentlemen, please standby our speakers will be rejoining us momentarily.
Okay.
Okay.
Now rejoining the speaker line.
Sorry about that it didn't have anything to deal with the questions which is fine.
Our apologies.
Well that gives me a chance to add you know Dexter hope you enjoy the.
A stronger U S. Dollar is as you move to London anti Democratic.
Got.
It clearly has not escaped me.
The timing may be good.
And I'll add my welcome to the rest for for you Dennis I look forward to working so did you guys catch my question is where should I repeat no. We didn't I'm sorry. So please just give us does getting that would be great. Yeah, well I mean I'll give you. The short version just for the audience I've just curious Dennis your view on strategic importance of small markets versus large markets. You know cable has a scale business at the same time you have super scale.
Al in the optimum footprint, so not not suddenly it is specifically, but just curious the economics of small markets versus larger markets and where you might focus over time and then you know Dexter as you think about our strategy I think the last couple of quarters. The I think the discussion has been more focused on debt pay down and then.
Having flexibility for tuck ins or small deals.
Is that how we should think about going forward you still free cash flow positive. So.
I'm, just curious where your M&A focus will be thanks.
Yes.
<unk> got as an operator I have experience in working in both my footprints have included very small markets as well as large markets and.
My focus right now is looking at our go to market strategy and how do we address the needs of.
Those disparate markets in the right way I think we have the I'm excited about our strategy and where we're headed and so as I go through the budget process again and build our strategy for 2023 I'll be taking a close look at how we are addressing both and how we can continue to have a customer experience.
Blends as we move forward.
I think on M&A strategy I don't think there's much to comments we've been.
Pretty reactive on certain things, whether there are assets like tuck ins that are available.
Or as additions to some of our other verticals.
That we would look at and I think that there is a whole host of things that we would look at that are on our plate.
Some that may be that you may expect and some that you may not expect and so I think at this point in time, there's no need for us to talk about the art of the possible.
But there.
There are things that we probably will talk about in the near future in terms of things we're thinking about.
Alright, Thank you Paul.
Thank you.
Thank you. Your next question is coming from Jon <unk> from UBS. Your line is now live.
Great and again welcome to Dennis and congrats to Dexter.
Could you talk about the broadband market I guess.
I know you talked about a couple of things driving that the current trends and maybe you could talk about the difference you're seeing in terms of competition in the in the submarine markets versus the.
Yeah, the old Cablevision markets and then.
I guess, you said that you saw the typical back to school benefit I guess are you, suggesting that would help them back to school benefit that the trends would be worse as we look into the.
<unk> fourth quarter, and then lastly, as you look out to 2023 based on the trends you're seeing on the fiber side.
Do you think that we can get to get to the point, where we get back to get back to growth sometime sometime during the year next year or is that something that we would expect more in 2024.
Yes.
<unk> taken the entire question on what are we seeing in terms of competitive dynamics and and.
And and how our kpis are evolving in our markets.
I think it's still some of the same which we've been commenting on Q1 and Q2, which is.
Clearly, we're seeing effects from <unk>.
It's been out there fiber overbuild or.
Primarily in the west, but we do obviously have frontier who has grown in the east.
In a small part of our footprint in Connecticut.
So that remains the same.
The geographic dynamics remain the same as well, which is on the east side.
We have a lower gross add activity.
And on the west side higher churn activity than we have seen historically.
And so we've seen a little bit of the same as we saw in Q2 versus Q3.
We go through to your point about back to school I don't think it's fair to talk about a unique.
Period of time, where the.
The whole year evolves in terms of unique periods of time in terms of how things evolve in Q2, obviously, we have a big churn issue in the west relating to University towns and whatnot.
But effectively Q2 to Q3 was pretty much flat quarter over quarter sequentially in terms of the performance.
I will say, we've seen some stabilization in October .
Relative to the run rates that we saw in Q1 and Q2 and Q3 that are that are a lot more attractive than we've seen for the for the balance of the year. Initially so.
The work has been.
Fast and furious for the past 12 months to 18 months, we continued to do a lot of work obviously on the fiber build and the.
And the Newbuild.
And our investments on distribution and care and it's a question of time relative to your question relating to 2023, but I'll, let Dennis go through obviously the budget process and comment on that when we get into Q4 in our earnings.
Great. Thank you.
Thank you next question is coming from Jonathan Chaplin from New Street. Your line is now live.
Thanks, Tom.
Kind of following up on on.
That question, if I may I'm wondering if you can give us a little bit of context for what the trends look like in southern linked sources optimum whether you're.
Losing subscribers in both markets at the moment.
One is a function of China's you mentioned extra and the other is a function of lower gross adds.
And whether the sort of the trajectories are equally challenged.
And then I.
Just sort of pick up on a question that's come up a couple of times, so Dennis what's going to get the business back to subscriber revenue and EBITDA growth from here you mentioned that there was a strong foundation.
It's already been late is it sort.
So I was just calling out the strategy that's been put in place already.
Or do you see.
Big changes that are acquired as a function of your strategic review.
That youll sort of implemented to get back to growth. Thanks.
Jonathan I think on the trend side.
Trends are improving.
And I think the overall.
Macro commentary of lower gross add activity in the east.
Higher churn in the West remains overall the same.
We are losing.
Subscribers in both the east and the West.
On a year to date basis.
But again, we are seeing some some rays of of.
Sunshine coming in and that's just really about the investments that we've continued to do throughout the year and all the various things that we've spoken about.
Between care distribution rebrand.
And another technological things and so.
I think the trends are the same but.
But they're moving in the right direction.
And from my perspective in the first 30 days I've seen the investments that have been made and I see the impacts I'm, bringing my operational experience and customer experience lens now.
<unk> had the opportunity to talk to hundreds of our teammates spend time in our frontline's and I don't think it's necessarily.
Significant change in strategy or further investment, but I do think that we need to get focused on process improvements and operational efficiencies and I think that.
I'm getting some great feedback from our teammates themselves on the Frontlines and I'm spending time, there understanding kind of end to end.
There may be some opportunities to continue to evolve our customer experience and deliver great service.
Got it thanks guys.
Yeah.
Thank you. Our next question is coming from Brett Feldman from Goldman Sachs. Your line is now live.
Yeah, Thanks for taking the questions and welcome to Dennis.
As some of your cable peers have also seen their broadband trends softened considerably.
Leaning hard to mobile and I think they are increasingly talking about it as a mechanism for pulling through broadband.
In particular advertising mobile that's a great way to save money.
But of course, you have to buy their broadband in order to do it you've restructured your opportunity to use mobile more significantly.
T mobile deal, but you've actually eased off a bit recently, so I was hoping you could give us your latest thoughts on the role you think mobile can play in helping to get the broadband business back to growth and just a quick one for Mike can talk about how you've been using some of your cash to pay down some of your debt. Your bonds are trading at pretty significant discount to par I'm wondering if you're also in the market buying back bonds or how you think about it.
The opportunity to do that thank you.
No great question.
In my experience I do find that mobile is a great product, especially paired with the broadband product and we.
We are as you know continuing to expand our retail presence and so I'm, having some deep strategy conversations with the team on where we've been with mobile and I do think there's opportunity that I'm very excited about and so we will be looking at our current offers and looking at how we can continue to <unk>.
All of our bundles and our offer strategy. So that we can drive broadband and also drive mobile absolutely.
Yes.
So Brett in response to your second question, certainly very aware of the manner in which our debt is trading in the marketplace that hasnt been lost on US we have not to date engaged in any sort of open market repurchases of our of our bonds our debt pay downs to date have been via the revolver as we alluded to in some of the <unk>.
Repaired comments is.
It's a little bit easier to pull off from a logistical standpoint, and the enhanced liquidity as a value as well, but it's certainly on our radar screen and something we'll continue to contemplate something we've contemplated historically havent gone down that road, yet, but we're very mindful of it.
Thank you.
Thank you. Your next question is coming from Michael Rollins from Citi. Your line is now live.
Thanks, and good afternoon, Kevin.
Thank you <unk> welcome to Dennis.
Just stepping back on the future of all Keith I'm curious for each of you how youre thinking about the merits just generally of altice USA being a public company versus a privately held company.
And then second just.
Just following on some of the discussion points on the customer experience what are the opportunities for our teeth in the future to partner to accelerate the customer experience, whether it's for licensing for technology or trying to further accelerate distribution or even opportunities to enhance our bundles.
Thanks.
Okay.
Well I'll take the first one I mean.
I did misspeak them to all of you. If we were a private company. So that would definitely be one of the [laughter] the low points of doing it but all joking. Aside I think this is obviously something that hasnt escaped us in terms of our ability to maneuver with more flexibility.
In a private context, but those are decisions that are at the board level and shareholder level.
And not on the table today and in terms of our discussions but that is something that.
<unk> is an analysis that are that has been looked at and I'm sure will be looked at again.
In the future as as we continue to.
To go through the budget process and going into 2023. So I don't think same thing of any relevance to comment on.
But it's clear that being a private company versus a public company.
It has merits in both ways in terms of the right incentive programs.
Capital.
Availability, but also the flexibility to operate more under the radar and those types of things so.
That's all I can say today and at some point in the future maybe theres a lot more to talk about there.
And on the opportunity in our customer experience with partnering.
Yeah, and this is Dennis Matthew I'm not sure I fully understand the question here, we do partner with we have businesses that are supporting our operation across the ecosystem, whether we're talking about call centers and or <unk>.
Installation repair et cetera, and so that's the strategy that we're constantly looking at in terms of the mix and what's the right approach and being able to deliver the right level of quality and managing those partners most effectively to deliver the.
The quality that we would expect and so that is a.
A part of the review that's that's happening as part of the budget process and the strategy sessions and really figuring out the right mix. So that we can deliver the best experience.
Thanks.
Yes.
Thank you. Your next question is coming from James Ratcliffe from Evercore ISI. Your line is now live.
Thanks, and congrats for the next or in a welcomed to Dennis.
Just your.
Your thoughts in particular on fixed wireless and how you combat that because you've been building out our fiber and clearly if that gives you some advantages and talk about the NPS scores improvement there.
But your HFC product is already materially better than than the fixed wireless product. So yeah. If you're if that's the competition how do you combat that as a competitive force. Thanks.
That's great question, and that's part of what I'm looking at as.
And as I look at the pricing as I look at it.
Packaging as I look at our offers.
As I look at our positioning where we have products available in our sales channels.
I do think that we've got a great portfolio of services, especially as we discussed earlier about bundles that we can create with mobile and so.
Looking at all of these tools and assets, we're going to pull them together. So that we can come back compete most.
Effectively and and fiber in particular as we continue to drive that and roll that out I think that's going to give us.
The best technology in the marketplace and so we're excited about driving that as well.
Thank you.
Yes.
Thank you. Our next question today is coming from Peter Zaffino from Wolfe Research. Your line is now live.
It can cause this is Mike in terms of visibility on unit cost per household for the fibre rollout we are pretty good visibility I think there'll be some some inflationary pressure, but I don't think it would be dramatic in terms of labor cost and on material costs, but you're right. You made a good point, we do have locked in certain longer term contracts to procure both the labor and the materials that we need to do that I think I think what will drive very.
Ability and unit costs will be honestly the mix between build.
Built in the eastern build in the west the west billed as we've alluded to the previous Commentors will be a little more expensive both due to lower household density per mile as well as the fact that we do have a little more exposure to underground in the west than we do here in the east.
I think I've visibility is pretty good on both of those instances.
Thank you.
Thank you next question is coming from Stephen Chahal from Wells Fargo. Your line is in our life.
Thanks, and the fiber passing as as you continue to accelerate those I'm just wondering if there's anything that's constraining that growth, whether it's labor or permitting I imagine you'd want to pull it forward as much as possible and maybe you can talk about what the cost per passing you are currently seeing is excluding CPE and then.
As a follow up to that you're putting fiber into the market. You commented about seeing some fiber coming into your market from Oprah builders when that happens and you see it on offense and defense. How do you think about fiber or poo versus cable or Pooh does it put any price pressure into the marketplace or is it really just competition for net ads because we are seeing some price increases.
Across the cable channel. So I'm just wondering if you think fiber impacts those but it's really just a competition for customers and not over price. Thank you.
I think on the passing science, we're going as fast as we can.
Is is the overall theme and you know with Ah obviously, we've been doing this in the east for the better part of three years.
And as you can see in our numbers, we've been accelerating throughout the year will see a little bit of a slowdown due to weather in queue for but will continue to accelerate going into 2023, as we're pretty much done by 2024 on the east.
On the west it's a little bit more complicated issue, but it's just that you're dealing with a lot more disparate geographies.
And so to go with and scale quickly yeah. It takes a lot more organization and planning.
The limitations are not really about labor.
One limitation that we've seen regularly in the east has been permitting.
The state of New York.
Has been somewhat of a bottleneck in terms of permitting we probably have.
Two to 300000 permits were waiting on the state of New York, we've been able to to redirect some of our efforts into New Jersey, and Connecticut. This year.
As we await permits in the state of New York, but that's those are they're really the only impediments.
We do have access to to Labour we have access.
To the raw materials as well.
And on the West it's just a question of time and getting getting our ducks in a row relative to all the various different communities.
That are out there.
In terms of fiber <unk> I mean, the overall theme is gross adds in fiber tend to generate 10% plus.
Higher gross at <unk>.
Then we see an HFC.
But when we are fiber versus fiber in offense defense as you as you mentioned <unk>.
Obviously, the the the defensive side to it.
Is materially improves our our churn in our gross AD profile as we start releasing fiber homes against another fiber over builder.
Connecticut is probably a good example of that given given that frontier is built there as we have built as well and so.
That that type of competition will be more.
More even handed and I do think it's less about thinking overall about gross at our poo. It's about your customer, but I think we are very diligent about thinking about our pricing and Dennis and the team is very focused on that.
And our go to market strategy. So it's not customer at any price alright, So we're being thoughtful about pricing and his mvpds are raising prices.
We're going to be obviously, a thoughtful about our pricing levers as well.
Thank you.
Thank you next question is coming from Frank Loosened from Raymond James Your line is our life.
Hey, guys. It's rapunzel, Frank So you might have spoken to this earlier, but can you guys give us just a quick update on your how you would rank your capital allocation priorities. Currently and then secondly, uhm again, you guys might have touched on this a bit earlier, but.
Would you say that you've gotten through.
All our most of the supply chain issues that we're keeping you from selling into the fiber Bill previously thank you.
I think on capital allocation I think we're obviously focused on the investment cycle on fiber in Newbuild.
An excess free cash flow, we've been using for Deleverages.
Where we see the excess for cash flow were deleveraging on our on our revolver.
Pretty regularly so.
That's pretty pretty straightforward.
In terms of.
Raw materials or.
Cpe's related to the fiber side I think we're we're well underway, we've got the right inventory levels would prefer comfortable.
With.
With the rollout both on gross adds in a migration looking to accelerate on the migration side and we've got all of the our ducks in a row to be able to do that I think the installation process continues to get better and better week.
Week over a week.
Repeat rates.
Continuing to get better the issues that we obviously everyone faces as they start rolling out in the early early phases are getting better and better as as technicians are are getting more and more experienced right. So.
It hasn't escaped us that if you look at New York installation process is a lot better than Connecticut.
<unk>, New Jersey because of the time served.
Our New York technicians relative to our New Jersey, and Connecticut, once and as with those will get just only better and better as we get into 2023.
Thank you we've reached the end of our question and answer session I would like to turn the floor back over to Nick for any further closing comments.
Thanks, everyone for joining the let US know if you have any follow up questions otherwise you'll catch up with you in the next few weeks. Thank you.
Thank you that does conclude today's teleconference. A webcast and we disconnect. Your lines at this time and have a wonderful day. We thank you for your participation today.