Right here?
Yeah.
All right.
It's coming. Turn up voice experience there. Okay, everyone, thanks for joining us this afternoon. Again, I'm John Hodulik from the Media Telecom and Infrastructure team here at UBS. This afternoon, we are joined today by Altice's Chairman and CEO, Dennis Mathew. Dennis, thanks for being here.
Yeah, thanks for having me. Happy to be here.
So, Dennis, you've made a fair amount of progress in turning around the fundamentals in your short time at the company, which is 14 months. I mean, that time went fast. What inning of that turnaround would you say we're in right now? And as we sit here, sort of out of 2023, looking into next year, what are your main priorities for 2024?
Yeah. John, we're in the early innings of this, turnaround. When I joined the company, we made it very clear that we were gonna be the connectivity provider of choice in every community that we serve, but those can't be just words, those have to be actions. And so we're laying the foundation of, best-in-class employee engagement, best-in-class customer experience, and that's what's gonna translate into growth.
We said early on, and often that there were a few things that we wanted to accomplish. You know, we wanted to improve our customer experience, and we've seen tremendous growth, quarter-over-quarter, delivering improved TNPS. We said that we were gonna focus on mobile, and we're seeing mobile acceleration every quarter, and Q3 was 5x of the previous Q3.
Now, we said we were gonna deliver on fiber penetration, and we've seen a record high in fiber net adds past quarter, and we're continuing on that trajectory. And then, there's a whole host of other things, stabilizing OpEx, stabilizing ARPU erosion, all of these things we said we would do and we're doing, but the number one thing was transforming the culture.
And that's, I'm happy to say that we are making meaningful progress. You know, we've brought on 60+ new VPs and above, sales leaders, ops leaders, finance leaders. Almost as important as anything, we've put in some new leadership at the area level to have a more hyperlocal presence as we go forward. And so as we look at 2024, we're gonna do more.
More mobile, more fiber, continue to drive customer experience, continue to improve the quality of our products and our network and our services. I'm excited about B2B. As I talk about bringing on the right people, we just hired Michael Parker as the new president of our B2B business, because I think there's lots of opportunity there in terms of building out the portfolio, adding a whole another level of rigor in terms of sales and execution, and really driving that business, as we go forward. And so we're excited about 2024.
You know, you talk a lot about sort of employees and getting the right people in the right place. How far through that process are you? What did you say, 60 VPs and above that you've hired? I mean, that's a lot of people.
Yeah.
Um-
It is a lot of folks. You know, we've got folks, you know. Michael just joined today, so we got folks that are days in, weeks in, months in. I think we're, I mean, you know, it's, you know, it's more arts than science, but let's say we're 70%-75% of the way through in terms of bringing on the right people and getting people into the right seats.
You know, it's been a bit of that as well. We've had great people on the team as well that we needed to put in positions to succeed. But I'm very excited that everyone is coming in knowing what great looks like, and that's the key, being able to come in and work as a team. There's no silver bullet, John.
There's probably 10,000 small actions that need to happen, and we are working together as a team to maniacally prioritize and drive disciplined execution. So we can't boil the ocean, but we know what we need to accomplish today and tomorrow, and every Monday needs to be better than last Monday. Every week needs to be better than last week, and we measure that.
We literally report on that, we measure that, and we continue to push ourselves. And so we're continuing to finalize the team, but we feel good entering into 2024 that we've got a meaningful portion of that done.
Great. So let's focus on broadband. You know, in your short stay at Altice, you've been able to cut broadband subscriber losses meaningfully, but you're still seeing declines. What's the pathway from here to subscriber growth?
Yeah, you know, being in the industry for a long time, it's clear to me that people want two things: they want quality, and they want value. And there's been a lot of work that we've done on both of these areas. There's more work to do.
As I mentioned before, quality in terms of quality products, quality network, quality service, that's translating into better NPS, that's translating into 1 million less phone calls, that's translating into 300,000 less truck rolls. These are all, you know, kinda leading indicators to the fact that we're seeing improvements, translating into improvements in churn and helping us just go to market more effectively. The value piece is...
One element of that is mobile, and having that in the portfolio, going to market with Optimum Complete, being able to bring, broadband and mobile together, as an offering to customers. You know, when we did the consumer research, as we prepared to offer and go to market with Optimum Complete, you know, over 25% of consumers said they wanted a bundle with broadband and mobile.... you know, you could say, well, where is the rest of the 75%?
But the reality is, five years ago, that number was probably single digits. And so, it gives us tremendous value, especially as we compete against fixed wireless. We're able to provide $300+ dollar value with Optimum Complete, and even some of the more mature, providers like Verizon, $500+ dollar value, annualized.
And so, I think it's a combination of continuing to deliver great service, continuing to deliver great value, and then there's some work that we need to do to compete at a more hyperlocal level that our new regional leadership teams will allow us to do. The reality is that historically, we've not done a good job.
When a fiber overbuilder showed up in our footprint or a competitor, we were always kind of on our back heels in a defensive posture, reacting. We're gonna go on the offensive and tell our story and make sure that we have the right offers and the right go-to-market strategy to compete most effectively in these areas.
You mentioned fixed wireless. Maybe you could just talk about how the, you know, in the 14 months that you've been here or you know, what you've seen in the last year or two from a competitive standpoint, and then any comment on what you're seeing in terms of fourth quarter trends.
Yeah. So fixed wireless remains a competitor across the footprint. You know, the availability is really tied to the capacity they have on the network, but they market broadly, and then they have to adjust based on where the sales are happening. You know, we're seeing T-Mobile, we're seeing Verizon, particularly in the B2B space.
We're seeing AT&T pop up a little bit. I think they're in their early innings in places like Texas and West Virginia. But we feel like we have a really great set of tools to compete, and we're seeing that as we make progress in our win share. A 4-point improvement in win share in the third quarter, and I think that's due to two things. One is just stronger sales channel performance.
As I mentioned, we brought in new sales channel leaders, new leader of retail, new leader of inbound sales, new leader of direct sales, new leader of digital, new leader of B2B. Across the board, we're seeing better performance management. We're seeing a stronger sales culture, which is, you know, yielding to better yield, better conversion, better productivity.
And then we're going on the offensive a bit in our marketing as well and just telling our story. We have a story to tell on our fixed solutions versus fixed wireless, and that we have a great product and a great value, and that's helping us make progress. And then in terms of Q4, as I mentioned at the beginning of Q3, we are seeing heightened competition, and similar to our peers, you know, it's gonna be...
We're seeing that competition play out, and so we're gonna continue to battle to drive Q4, but it's been an increased level of competition.
Got it. Okay. And then, can we talk a little bit about sort of the trends you're seeing in the fiber areas versus the non-fiber areas? I mean, you know, are the underlying subscriber trends better in the areas where you have fiber?
I mean, the fiber areas, when we look at the metrics, no matter how we look at it, we look at NPS, double-digit benefit on NPS. We're seeing 10-point benefit on churn, survivability in the first year. We're seeing 20% benefit on ARPU from a growth add perspective. And so we're really bullish on what fiber is able to deliver in the footprint.
We're you know, we have 2.7 million homes, and so we're laser-focused on continuing to drive adoption and fiber penetration. That being said, you know, as we look across the footprint, we're very bullish about our HFC networks as well. You know, we're investing in DOCSIS 3.1.
As I mentioned at the start of the year, we had 500,000 homes that didn't have 3.1, and so we've upgraded 200,000+ homes to 3.1, and we're gonna continue to drive that next year. And we're using the full portfolio of solutions that we have to drive our go-to-market in the areas where we have fiber and where we don't have fiber.
With the 3.1 upgrades, how quickly do you see trends improve there? And does it help you out, both in terms of sort of gross add and churn?
It's really all about stabilization. It really allows us to deliver a better experience, really allows us to deliver, you know, the right quality of network. You know, we offer gig speeds in 95% of our footprint. We wanna get to 100% in 2024.
And so it's a combination, when I mentioned before, on how do we really, stem churn or make sure that we're delivering on our promise of quality. It's quality product, quality service, and quality network. And the 3.1 upgrades is an element of that, promise to delivering the highest level of quality.
Right. And then what about ARPU? Because you said that, you know, it's all about value, so speeds versus the, you know, price that you guys can command. How do you see that trending over time? And are you providing enough value to our invest-- for, to customers to sort of, you know, bring them on and sort of bend the curve in terms of subscribers?
Yeah, the ARPU story is very clear. We're gonna use a lot more science and less art. When I joined, the ARPU erosion was really at an all-time high, and it was, we were bleeding ARPU in our care channels, in our retention channels, and we unfortunately did not provide our teammates with the right tools to be able to have those conversations in a surgical, strategic fashion....
You've seen us, really moderate that ARPU erosion over the past few quarters, and we're gonna continue to make improvements as we go into 2024. We're launching new tools and new capabilities that will really allow our teammates to be able to have the right conversation with every one of our customers.
So if they're calling us in care, they're calling us in retention, we're able to have a robust conversation that's tied to price, that's tied to speed, that's tied to value, and right-size them from a packaging perspective. You know, the other element is that we're seeing incredible, you know, ARPU benefit on fiber, and so we need to continue to lean in to driving our fiber strategy.
And you know, when I walked in the door, we really didn't have a clear retail strategy. Now, our retail strategy is all about selling and sales. And, in our footprint, we have 90%+ , folks that walk in the door are existing customers. So it gives us an opportunity to talk about mobile, talk about speed upgrades, and talk about fiber.
And that is already starting to pay dividends as we see an increased level of performance in our retail channels. And then the other element of ARPU is base management. And unfortunately, quite frankly, when I joined, there really wasn't a base management strategy in place. There was, you know, kinda promo roll and rate events.
And so we are implementing a much more robust strategy that includes speed upgrades, it includes providing predictability and transparency on price so that people know what's happening and when it's happening, and then having a conversation about mobile so that we can deliver the value that customers are looking for.
Seems like the more times as we talk about, the more it sounds like when you got to Altice, was there less infrastructure, sorta less, you know, sort of analysis and rigor? And I mean, especially, you know, from what I know of, you know, where you Comcast, where you came, it's a different animal altogether-
Right
... in terms of how the business was run. And would you say that you're getting to the point where you're comfortable with the infrastructure that you put in place so that you can sort of effectively manage these assets? 'Cause it really doesn't seem like, you know, as we go through sales or customer care or churn management, all these kind of things, that none of that infrastructure was in place.
Well, one, I'll just tell you, you know, maybe I need a cocktail for this. I'm, I'm never comfortable. I live in a constant state of paranoia, and so that's how I live. The reality is, there's more work to do. Do we have the infrastructure in place?
We are in the early innings, but we have vastly more tools 14 months later. We have vastly more capabilities to be able to drive a more effective go-to-market, to be able to deliver higher quality, to be able to manage our base more effectively, and yet there is more to do, more work to do. And so, you know, Marc and I, and many of the leaders that have joined, come from a level of operational rigor that it's a daily grind.
Every day, every day, you know, maybe every minute of the day. You know, I've visited some of my teams and areas, and they're talking to me about, "Hey, 7:30, we're talking about the installs that are coming up, and 8:15, we're talking about the customers that are having challenges, and 9:00, we're talking about the new build activity." And so, you know, that's the level of rigor that we're putting in place that just didn't exist prior.
Makes sense. Lastly, on getting back to ARPU, as you guys roll out more fiber and upgrade the coax, the sort of Optimum West, is there room for you to sort of grow ARPU from here, you think, as you look out over the next year or two?
Yeah, I believe that we've been able to get to a point of stabilization, and then as we leverage assets like fiber, as we sell in, gig and multi-gig, as we bundle in, mobile, I do think that there's an opportunity to stabilize and then find opportunities for growth.
You mentioned a new hire running the business segment. Can you talk about that as an opportunity, maybe talk about where... how you see your sort of penetration of the business market now and where you can take that to?
Yeah, I think the reality is that, we're very focused on connectivity, and I, you know, I come from a world where there's a much more focus on solution selling. And we have an opportunity to really build out the portfolio to grow ARPU and to grow the business. And so there's exciting opportunities when you think about solutions like cyber, cybersecurity, you know, LTE Backup, Managed Wi-Fi, SD-WAN.
You know, it's just the tip of the iceberg. Mobile, didn't even get into mobile yet. And so, you know, connectivity is great, but we don't, we wanna be more than just connectivity, and we wanna be operating at all levels, you know, SMB, mid-market, maybe one day enterprise.
We're excited about bringing on someone with the level of industry experience like Michael, that can help us build out the portfolio, build out the operational discipline, and help us start to grow that business.
And you saw a little bit of that growth in Q3, just through some rigor in terms of driving sale to completion rate and making sure that every day we're waking up and we're looking at the installs, and we're making sure that they're getting done, and if they're not getting done and they're falling off the rails, we're putting them back on the rails. Even simple things about like putting in the right quota and putting in the right sales compensation. And so these operational items will help us really put us back on a path to growth for B2B.
Are you seeing any pressure in the B2B segment and from fixed wireless? Mike Cavanagh was here earlier today. He kind of mentioned that that was one area where fixed wireless was starting to make some inroads.
Yeah, we are. I mean, I think Verizon, in particular, we've seen, you know, really get focused there. You know, we just need to, we have the right tools, we have the right portfolio, we just have to get on the offensive.
We haven't done a great job of telling our story. We're starting to do that. We were a bit gun-shy in the past of even having any marketing that told our story versus fixed wireless, and now we're starting to do that. We think we have a great product. We think we have a great value proposition. We're excited to bring mobile into the B2B portfolio. We think we'll have that done in the first half of 2024, and that'll give us a Optimum Complete for business solution that'll allow us to compete even more effectively with solutions like fixed wireless.
But that being said, we also have a path and a trajectory to deliver a broader portfolio, and then even shoring up the portfolio. There's elements of the portfolio where we don't have a full solution set of video and voice, and so we're shoring that up as well.
So yeah, let's turn to wireless. So you, I think you said that you've seen a year-over-year, and I'd have to look at the numbers, sort of 5x increase in the-
Yeah
net adds on a year-over-year basis.
Yeah.
So what's driving that? Can you just talk about where you are in the wireless strategy? I guess it's a small base, but, you know, growing, you know, where those subs are coming from, and what channels that they're using.
Yeah, we're really excited about mobile. It's one that, you know, we have a lot I have a lot of familiar with from my previous life. It took us some time to get our legs under us, but we did it, and I know we can do it here as well. You're starting to see that. I think first and foremost, we needed to build it into the packaging.
You know, it was kind of sitting on the outside when I showed up, and it was, there wasn't a real go-to-market strategy. You know, I think last year we had kind of this free offering for a period of time, but that wasn't long-term sustainable. The good news is that we were able to convert 60% of those free customers into paying customers.
But some of the structural things that we did, first and foremost, we've invested in retail, and we made it really clear that retail is to sell. That is the purpose of retail, and we're converting the culture and converting the leadership and really the focus to selling mobile, first and foremost. And we're seeing incredible performance by our teammates.
We've adjusted the compensation, we've adjusted our incentives. We're just doing basic things like performance management and, you know, combining that with Optimum Complete, we're able to tell that story much more effectively. And so we're seeing great performance in retail. We're also, you know, which is more of a base management type strategy, but we're also seeing great performance in our inbound channels, which are primarily driving our growth adds.
We've seen, you know, we've been able to double the attach of mobile since we launched Optimum Complete, and it's just a matter of putting in that rigor and discipline to communicating the value of mobile and, and the benefits that it delivers.
We've also opened up new channels. Retention, care. Historically, these are channels that I'm used to also participating in selling solutions and making customers aware of the value and the products that we have available to them, and now we're doing that, and, and we're seeing great performance across retention and care as well.
That can that be, like, a lead offer, right? A bundled broadband and wireless. I mean, is that... I mean, I can't think of it right now, but, I mean, do you guys go to market with advertising and say, "Hey, save X amount on your bill over the course of a year with these together?" I mean, is that-
No, that's right.
Aside from just sort of penetrating the existing base, but sort of growing both broadband and wireless.
Yeah, that's right. We offer $300, you know, annual savings when you stack up Optimum Complete against fixed wireless solution like T-Mo's. We offer $500+ annual savings, and so we need to continue to raise awareness, you know, non-sub awareness or customer awareness, that we have mobile. And so that's been a huge focus of ours, integrating it into our marketing and making sure that we're talking about it at the right level so that people are aware that we have this solution in our portfolio.
But we do think it's a great conversation, both in terms of acquisition and in terms of base. When customers are calling us in retention, they're really, you know, looking for solutions to save sometimes on their monthly bill.
This is a great conversation for us to have, and, we're finding that it's absolutely resonating with our existing base, but it's also resonating, from a go-to-market perspective. There's more work to do. It's also very helpful when you think about some of our west markets, and we're competing against these fiber overbuilders who don't have solutions like mobile and video in their portfolio. It allows us to offer a much broader portfolio of products that our consumers are looking for.
How should we think of trends in video? I mean, obviously, you guys, like the rest of the industry, are seeing video losses, but I remember, you know, Jim Dolan complaining about profitability of video, you know, 20 years ago. So I can imagine that's a huge sort of profit pool for you at this point. But how do you look at that product, you know, sort of over time? I mean, I could imagine sort of continued losses, but-
Yeah.
Talk about trends and methods.
Yeah, 50% of our customers take video, so it's a very important product. You know, the near-term objectives are three, is to, one, right-size our pricing, packaging, tier mix. Our video margins, as you saw in Q3, have expanded a bit, and so we're on that journey. We need to right-size video within our existing portfolio.
And part of that right-sizing also includes fixing some of the structural costs related to supporting video, like self-install. So, you know, where I come from, historically, we had very robust self-install options for video, which we don't have today. And so we just launched a stream video product that is, one, an amazing viewing experience, but also allows customers to install the solution themselves. And so we're gonna be launching that capability in 2024 so that customers can...
And, again, that's gonna be tens of thousands of truck rolls that we can pull out of the system and deliver a better customer experience. We're seeing that on broadband, where we've doubled our usage of self-install on broadband, and we have higher onboarding NPS, and we have, you know, lower cost because we're pulling out truck rolls.
And then third, there does need to be a different conversation with our programmers partners. You know, they're our partners, and so we need to work together. We need to put the customer at the center. You know, today, I have to tell you, traditional video defies the laws of basic economics. You know, demand is at an all-time low, and price and cost of content is at an all-time high! And so, you know, we didn't get here overnight. It's taken decades.
I know how we got here, but we need to figure out the path forward. And so those are the conversations that we're having. And you know, customers want direct-to-consumer offerings like streaming. They want- they don't want content that they don't watch. You know, they don't want to have to pay for that. And so as I think about video going forward, first and foremost, we're a connectivity company. We're leading with broadband, we're leading with mobile, but our customers are consuming video.
That's the number one thing they consume, and we want to be able to provide them traditional video solutions, direct-to-consumer solutions. We want to have a platform that allows them to consume that video, how they want it, where they want it. Customers are telling us every day, "I've got too many logins. I've got too many billing relationships. I'm confused.
Please help." And so that's our objective, is to find a path to help with platforms and partners that will come alongside to put the customer at the center.
You just launched this or you're launching the streaming service in 2024. I mean, over time, do you see that becoming the sort of core video service or sort of a moving away from the sort of traditional set-top box and going to a sort of, you know, adoption of a more streaming focus? And within that, what's the possibility of sort of basically getting out of the video business together and just sort of, like, reselling, like, a YouTube TV or Hulu with Live as your main linear strategy?
Yeah, I mean, I think in the near term, there's a couple things. You know, the stream service is actually a stream box that we've launched. It's an Android-based box that is self-installable. We'll be offering it in our retail centers. We'll make it available. There are absolutely folks that want kind of a traditional video experience, and we want to make that available.
That being said, it runs as an app on that Android box, which you can now download on Apple TV or any other OTT, you know, streaming box. And so, okay, you want a traditional box from us, we have it. You want an app, you don't want our box, you have an Apple TV box, we want to be able to allow you to watch our video service through that.
But then, yes, in the future, there may be a whole, you know, host of solutions that we can bring to market, but we are, again, in the early innings of looking at those types of solutions.
Turning to margins, you know, we've seen some real margin degradation, a lot of it, you know, ARPU-driven, new cost-driven, but you've gone from sort of highest margins in the wireless space to the lowest, which makes sense given your scale. I mean, how soon, you know, obviously, you know, this is sort of crystal ball forward-looking, but when can we start to think about margins bottoming here and starting to move back in?
Yeah, I'm excited that over the last few quarters, we've stabilized our OpEx, we've stabilized our margins. We think that there's continued opportunity to remove noise. You know, we're really in the early innings of this digital transformation.
This is a conversation that we're having internally for every element of our business. You know, we need to remove phone calls and just make it simple for our customers to use a mobile app, to self-serve, to chat, to use our IVR, to get text messages, and just self-serve and remove some of that noise, which will improve the customer experience and remove operating expense. That's just, you know, weighing down the operation. And then, removing truck rolls.
You know, we've removed 300,000 truck rolls in the past year with our focus on first-time right, quality products, quality networks, driving self-install. We think that there's more opportunity there that in combination with stabilizing our ARPU erosion, stabilizing our subscriber performance, we, I'm confident that we can get back to a path of growth.
Okay. And then lastly, on the financials, just CapEx, obviously slowed a bit with looking at your procurement. How should we think of your sort of fiber build plans going forward?
Yeah, we came into the year at about, you know, 25% CapEx intensity, and came in hot. The weather was good. We built like crazy. We got a lot of that work done early in the year. You know, we had some things that happened during the course of the year. But when I started at the company, I made it clear that we were shifting our fiber strategy.
First was in the West, where we said, we're not gonna fiberize the entire network. We're gonna be disciplined. We're gonna be surgical in how we deploy fiber in the West, and we're gonna really focus on deploying fiber in our new build footprint. In the East, we're also gonna be very disciplined. We've now brought that 25% CapEx intensity to 15%.
We think going into next year, we'll be a bit north of that 15%, but we wanna, we still are, you know, bullish on fiber, but we're gonna do that in a much more moderated pace. Very bullish on our new build strategy. You know, we've delivered 2% growth over the last couple of years, and we're very focused on doing that in an effective and efficient way going forward. And then we have 2.7 million fiber homes, and we need to drive more customers to that fiber network.
Got you. Then in the remaining time, I wanna turn to the balance sheet. Obviously, a lot of worry about the 2024 and 2025 maturities in a sorta higher for longer world. How do you think of these maturities and the risks they pose to equity holders?
Yeah, you know, the good news is that we've been able to raise that $1 billion guaranteed note in April. We completed the amend and extend at the end of 2022. That pushed out some of the maturities out of 2025, and so we feel really good that we have the runway we need to right-size the business, really get into the proper operating rhythm.
That being said, we're very focused on continuing to drive down and look at all the right options. And so we're looking at those options and talking through options every day, and you know, we'll be ready to move forward in the first half of next year.
First half of next year. Is ABS similar to what Frontier did? Is that a potential option for the company?
Yeah, we're in the early innings of those conversations. You know, that is an option. We're looking at all options, but that's one that we're in the early innings of exploring, and you know, we'll continue to pursue that, as we move forward, as well as just making sure we have a holistic view of all options.
Great. Well, Dennis, thank you for joining us today.
Yeah, thanks so much.
Absolutely.
Great to speak to you.