Expectations for Frontier’s Video Net Additions in 1Q17

Frontier Communications (FTR) views video services as a future growth driver. It anticipates that its Verizon (VZ) CTF (California, Texas, Florida) transaction will boost its video service proposition. Frontier has also gained video subscribers from the Connecticut wireline properties it acquired from AT&T (T) in October 2014. Frontier’s management remains confident that video and data subscriber trends for Frontier’s legacy and CTF operations will improve in 2017.

Frontier’s video subscribers decreased ~5.6% sequentially to reach 1.4 million at the end of 4Q16. In 4Q16, on a net basis, the wireline player lost 84,000 video subscribers, compared with 93,000 video net losses in 3Q16.

Frontier’s biggest threat comes from over-the-top (or OTT) video streaming services, which have a huge growth potential. Users have been subscribing to OTT services in greater numbers than ever, mainly due to the high monthly bills users are paying cable/satellite TV providers. A 4Q16 report from Digitalsmiths suggests that about 35% of users pay more than $100 every month to pay-TV providers. Currently, the major players in the video streaming market are Netflix (NFLX), DishTV’s (DISH) Sling TV, and Sony’s (SNE) PlayStation Vue.