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Frontier Communications’ Major Long-Term Growth Drivers

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Part 8
Frontier Communications’ Major Long-Term Growth Drivers PART 8 OF 12

Evaluating Trends in Frontier Communications’ Customer Retention Rate

Frontier’s customer churn remains elevated

In the highly competitive telecom sector, Comcast (CMCSA), Charter Communications (CHTR), and AT&T (T) are keeping Frontier Communications (FTR) on its toes. For FTR, customer retention is a critical metric.

Frontier Communications reported customer churn of ~2.2% in 2Q17, compared to ~2.4% churn in 1Q17 and ~1.9% churn in 2Q16. Customer churn is a measure of subscriber loss—the lower the churn, the better.

Evaluating Trends in Frontier Communications’ Customer Retention Rate

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In Frontier Communications’ case, the ~2.2% churn reported in 2Q17 showed an improvement from ~2.4% in 1Q17, primarily driven by CTF (California, Texas, Florida) FiOS. However, churn for 2Q17 was substantially more than its ~1.9% churn for 2Q16, which means that company is still struggling to retain its subscribers.

Spotlight on customer value

Not only is subscriber retention significant, the value of those subscribers is just as significant. Customer value shows whether FTR’s investments in subscriber acquisitions are bearing fruit.

Frontier Communications (FTR) reported average revenue per customer (or ARPC) of $63.65 in 2Q17 for its legacy operations. The company reported ARPC of $106.25 for its CTF operations, the businesses the company acquired from Verizon (VZ).

FTR’s combined ARPC was $80.38 in 2Q17, down from $83.20 in 2Q16, as depicted in the chart above. Despite FTR’s decline in ARPC from 2Q16, this metric has been stabilizing over the last few quarters due to lower customer disconnect credits.

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