Good day, thank you for standing by and welcome to the Altice USA Q2 Results 2021 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to hand the conference over to your speaker today, Mr. Nick Brown, the floor is yours. .

Thank you. Hello, everyone, and thanks for joining. In a moment, I'll hand you over to Altice USA's CEO, Dexter Goei; and our CFO, Mike Grau, who will take you through the presentation, and then we'll time at the end for Q&A. As today's presentation may contain forward-looking statements, please read the disclaimer on Page 2. Dexter, please go ahead. .

Hello everyone. Before we jump into a summary of our second quarter results, I once again want to express my gratitude for the continued dedication and commitment of the Altice USA team, with our voice decreased we wouldn't have been able to navigate the pandemic as well we have.

Starting on Slide 3, we saw an acceleration revenue growth from second quarter to 1.7% year-over-year with a particularly strong rebound in our News and Advertising business.

We continue to deliver broadband revenue growth up about 8% year-over-year, although we have seen elevated yield activity recently, as consumers return to home location, as well as the protractive impact of several pandemic-related regulatory programs and hurricane.

Despite these headwinds we reported flat organic broadband customer growth in Q2 or plus 30,000, including our recent Morris Broadband acquisition. We remain confident in faster customer growth going forward from our accelerated pace of footprint expansion, segment cable network upgrades and Optimum fiber upgrades.

We also continue to invest in innovative new products more seamlessly in our Optimum Stream device, which I'll come back to shortly. Turning back to financials adjusted EBITDA was flat year-over-year, even with some tougher comparisons, which Mike will touch on later.

We delivered another strong quarter of free cash flow at $406 million and just under $1 billion for the first half of the year alone. This has supported $726 million of share repurchases year-to-date or just under half of our full year target. All of which gives us the confidence to reiterate our 2029 financial outlook.

Looking at Q2 revenue growth and more detail on Slide 4, you can see an acceleration celebration from the first quarter growing at 1.7%. Residential revenue was flat year-over-year, especially slow compared to the peak we saw at this time last year. Business services growth accelerated to 1.8% supported by more reopening activity.

Finally, news and advertising grew very strongly 36.4%, with much needed year-over-year comparison. Turing to Slide 5, trends in Residential business.

We reported organic net loss of 12,000 residential customer relationship, excluding Morris Broadband’s acquisition, which totally added 35,000 unique customers since the post-acquisition within the quarter. To provide some context the second quarter is usually seasonally weak for us.

As I flagged earlier this give you a noticeable pick up in new churn as markets are reopening more widely. This includes customers leaving our suburban footprints around New York and going back to New York City. Please remember, it's outside of our residential footprint.

For illustration, the huge turn was more in line with the second quarter of 2019, we estimate we actually would have been flat in terms of customer relationships and would have reported 14,000 broadband in addition, rather than post to zero.

Additionally, in the quarter, we disconnected about 7,000 customers for non-payment that was previously protected by pandemic-related regulatory programs, meaning the FCC Pledge or New Jersey Executive Order, are those affected by prior hurricane in Louisiana.

In other words, without the impact of elevated news churn, and pandemic programs and storms, we would have been at plus 21,000 data net adds, and plus 7,000 customer relationships for the quarter. We called at New York with the latest state to prevent us from disconnecting customers with legislation enacted in May this year.

While this year quarter was lifted at the end of June, going down with the end of the declared COVID-19 state of emergency, it has left some customer in revenue disruption which will carry over into the third quarter.

Those who have not been able to receive a normal disconnect policies across the whole company and so our trend should normalize by the fourth quarter. However, accelerated new churn for fifth, has we have continued to see it recently, it may be difficult to match historical 2018 and 2019 organic broadband customer growth for this year.

Against the backdrop our strategy remains the same, which is to achieve faster broadband customer in revenue growth by accelerating the pace of new builds, and network upgrade including our fiber rollout.

We are expanding our footprint and we'll be delivering services, which are consistent and that are offered by our competition which sets us really well for the next few years. On Slide 6, we would like provide an update on some various usage trends.

Average monthly data usage per customer was 445 gigabits per month in Q2 with broadband-only customers close to 600 gig per month. Video streaming remains the biggest driver of company with about two thirds of data usage and this is also helping to drive demand for higher broadband speed.

Remember, over 50% of our customer base still only takes 200 megabits per second or lower, so we still have a lot of room for growth here. 42% of our gross additions are taking 1 gig broadband speed in areas where it is available. We are very optimistic about the 1 gig and multi gig opportunities ahead of us.

Slide 7, shows us how much success we're having right now and we continue to up sell customers to higher broadband speed tiers. Our 1 gig customer penetration increased to 11.3% of the Q2, up from just 3.7% a year ago. Our average download speeds have nearly doubled in the past three years to 316-megabit.

And as you can see, bits is accelerating exceptionally following increased utilization the 1 gig service. Turning to Slide 8, we want to update you on our long-term network expansion and fiber strategy.

On the left you can see we are on track for at least 150,000 new home builds mostly edging out around Suddenlink footprint with more broadband and organically adding another 90,000 homes passed in North Carolina. This is an acceleration of our prior run rate of new builds.

We are still achieving about 40% after the first year of expanding our outline network into new areas, so we're getting very good return on this investment. Separately, we're continuing to upgrading existing homes in Suddenlink footprint in areas where customers previously only received a maximum of 150 megabits per second.

Taking this up to out to either 400 megabits or 1 gig. On the right you can see Q2 reached 1.1 million fiber homes passed ready to service, we are still on track to pass 0.5 million homes this year with the material pickup right now in summer months. Our penetration of fiber optics is now up to 4.3%, compared to just 1% in Q2, 2020.

About two thirds of our fiber growth has taken us to 1 gig product, which is our best service available today that we are focused on making multi-gig speeds available as soon as possible and should start marketing fiber more activity in next few quarters.

Moving to Slide 9, last week, we announced our latest product, Optimum Stream and Suddenlink Stream. This is a new 4K streaming device powered by Android TV operating system.

Customers will have access to a wide range of content, including over 50 streaming TV channels and all of them on the top streaming app pre-installed, with thousands more available in the Google Play Store.

The new stream device is available for free to broadband-only customers who take our 1 gig service or the high broadband speed available in the service area. And is available to other broadband-only customers for just $5 per month.

We believe this offers a really good alternative for our broadband customers that don't want to take a legacy cable TV bundle. Last week, we also announced the rebrand of Altice Mobile as Optimum Mobile, which is the first step in that plan to align all of our connectivity brands, including some intervention under one national Optimum brand.

Recall, we recently migrated all of our active mobile customers to T-Mobile network. And as we're seeing a much better customer service, this is a great time to rebrand and align the business more closely with our fixed broadband business.

Optimum Mobile had approximately 180,000 mobile lines as of the end of June reaching 3.8% penetration of Altice USA's Residential customer base with revenue in Q2 up 4%.

On Slide 10, on business services, I am pleased to say revenue trends continue to recover across our SMB and Lightpath businesses, as customer growth has been much better in recent months. In fact, Q2 saw a best ever SMB customer net adds in four years.

Business reopening activity has been accelerating as vaccination rates increased and operational restrictions relaxed. Restaurants, theaters, [indiscernible] travel, and tourism are examples of businesses in the industry that started to reopen more widely in Q2.

The swing back around the New York tri-state area is more dramatic because the COVID crisis generally hit harder. We still see a higher than normal retail and commercial office-based vacancy rates, which means many businesses are still missing, but the situation is improving.

As KC-12 and college kids safely go back to school, we believe this will be the next big step up for the economy in our B2B business. During the quarter, Lightpath also announced the expansion of its network into Boston through three acquisitions and to clean through new organic fiber build.

This strengthens Lightpath's presence across tier-one market in the Northeast, and we're making investments in growing the sales team to drive penetration.

Focusing on our news and advertising business on Slide 11, we saw a very strong growth this quarter up 36%, as remember; Q2 last year saw the biggest negative impact from the pandemic on our advertising business. Local, regional, and national advertising markets are all recovering, which we expect to continue.

And we saw additional growth in the recent New York and New Jersey election races. We still expect revenue to the whole of 2021 will be flattish on a year-over-year basis though as we have a tougher comp in the second half due to political pump. And now, I'll hand you over to Mike to go over the financials in more detail..

Thank you, Dexter, and good afternoon, everyone. Thank you for joining us today. Picking it up on Slide 12, you can see our adjusted EBITDA margin was 43.9% in the second quarter, which is in line with 2019 levels with total EBITDA growth flat year-over-year, excluding mobile EBITDA losses, our Q2 EBITDA margin was 44.8%.

And looking at year-over-year variances, we call that we had some temporary savings in the second quarter of last year about $30 million in total, including store closures and lower sales and marketing expenses. Our EBITDA less CapEx or operating free cash flow margin of 31.1% was also in line with 2019 levels.

As we ramp back up on the pace of our fiber rollout and new builds. You can see this again on Slide 13. As our capital intensity was 12.8% this quarter, almost exactly in line with 2019 levels. Without growth investments in fiber, and new home builds capital intensity would have been under 10%.

As we flagged previously, our CapEx spend is increasing backup to historical levels now as we're back on track with our network expansion and upgrades, without as many delays on the fiber permitting side in particular.

As Dexter outlined, we remain excited about the long-term potential of our network to keep delivering superior connectivity solutions to our customers at a reasonable cost driving sustainable volume-based organic growth.

Slide 14 highlights another strong first quarter order of free cash flow generation at $406 million, which means we've achieved free cash flow of $943 million year-to-date. I would highlight the cash taxes have started to step up now with a net outflow of $97 million in the second quarter.

We still expect total cash taxes of about $300 million to $350 million for the year. We also saw a cash outflow for the Morris broadband and Lightpath transactions closing in the quarter. And our cash flows from financing activities, included an outflow of $222 million related to our share repurchase program.

Moving to Slide 15, we show a consolidated debt maturity profile. Following our recent refinancing activities, the weighted average life of our debt was extended to 6.6 years. And our available liquidity was boosted to over $2.3 billion even after our recent acquisitions.

Our weighted average cost of debt remains at 4.7%, specifically recall that in May, we issued $1.35 billion of new 10.5 year, 4.5% senior guaranteed notes and $500 million of new 10.5 year, 5% senior notes to refinance the existing 5.5% senior guaranteed notes due 2026 and we pay a portion of the drawn revolving credit facility.

We have no annual bond maturity greater than 1 billion before 2025. All of which could be covered by either free cash flow generation or capacity from our revolver. We will continue to proactively and opportunistically manage our liabilities in the same way as we've done in the past and still see plenty of additional refinancing opportunities.

For example, we have a noncallable 6.75% bond maturing in November this year. So that's probably the next thing for us to address in 2021. Lastly, on Slide 16, we provide a reminder about financial outlook for 2021, which we are reiterating today. We expect to grow both revenue and adjusted EBITDA for the full year reducing leverage to under 5.3 times.

We are at a peak and leverage right now, given our recent acquisitions and as our EBITDA is normally weighted more to the second half of the year. Our medium-term leverage target remains unchanged at between 4.5 and five times.

We expect cash CapEx in a range of $1.3 billion to $1.4 billion as we ramp up our fiber rollout and new builds driving higher capital expenditures in the second half of the year. And finally, we are still targeting $1.5 billion in share repurchases this year, having completed just under half of this amount at $726 million year-to-date.

Lastly, before I finish, I also just want to take a moment to thank our team at Altice USA for all their dedication and commitment and emphasize how focused we are on executing on all of our growth initiatives. And with that, we will now take any questions..

[Operator Instructions] You have your first question coming from the line of Philip Cusick from JPMorgan. Your line is now open..

Hey guys. Thanks. First, I guess from Mike, can you help us think about EBITDA in the back half? You talked about a tough OpEx comp in the second quarter, growing from the second quarter level the 3Q, 4Q seems difficult. I'm curious why that happens.

And then second, Dexter, as you think about the consumer broadband growth expectation change, what's changed specifically that you now think it's tougher to hit that 2018, 2019 level? Thank you..

So to talk about the second half EBITDA, Phil, based on our own internal projections, different programs we have in place as well as some of the comps, at least on the OpEx side, get a little easier as some of those temporary cost savings reverted back into our cost base in the second half.

We're pretty confident we can grow EBITDA in a manner that's implied by the guidance we've given, you can do the math and figure out exactly what's implied by that. So we're pretty confident that we're going to be able to hit those targets, which is why we're reiterating that guidance..

Yes. Phil, I think, listen, on – we flagged this on the last call, and I think we flagged to some – with some of our shareholders is this – we've seen a reversal, obviously, with the elevated levels of move churn, and we've seen some impact regarding regulatory.

And if you see the footnote on Slide 5, we've got about 10,700 subscribers between New York at 7,000 and some storm-related numbers about 2,700 that are going to effect coming into the third quarter.

And if we take kind of our historical save rate in terms of un-disconnected clients that have been balanced forgiven and then effectively the save rate going forward, we're about 2/3. So we've got about 4,000-ish numbers of storm related and regulatory-related customers. But the biggest issue is really elevated levels of move churn.

And as we flagged in some of the commentary, we've seen about 14,000 incremental move churn in the second quarter of this year relative to the second quarter of 2019. And so we'll be cautious here.

If move churn continues to persist, and we've seen elevated levels of move churn in July, then the numbers that we expected to hit for the year, which were historical 2018 and 2019 numbers, we may come in right on that. But we have to really see, if those elevated levels of churn continue.

Just to refresh the memory, I think in 2018 and 2019, with about 72,000 broadband net adds for each of those years. Last year, in 2020, we did 142,000 broadband net adds, right? So obviously, the business is growing on a cumulative basis 2021 versus 2018, 2019, but maybe not at the rate of 2018, 2019 individual years if elevate in churn continues..

Dexter, on that move churn, the housing market is really strong. I would think anybody moves out of a home, someone else is moving back into that.

Are you finding that you're losing share on churn now? Are you a net share loser on customers who turn over or whether it's yours or someone else?.

Well, I think that would be a relevant comment necessarily for us if we had a much bigger footprint, right? But as you know, just in the New York tri-state area, we benefited from quite a bit of people leaving the city to going to the outskirts of the city, and that move churn is reversing effectively in the other way.

And so people are not necessarily at full capacity penetration, replacing the empty homes in Long Island or in Connecticut or New Jersey that are coming back into the city. So we have not – it's not a share issue.

We're just in our footprint and in the southerly footprint, in particular also, as you know, you move down to the next town over that may not be our footprint. So there's some rearranging. Again, on a cumulative basis, if you take 72% in 2018 and 2019, that's 144. We did 142 in 2020.

We're going to materially beat the average of 2018 and 2019 to a point about housing activity, but I do think we're going to see some reversal or have seen some reversal in some of those gains that we did last year, which are just going to bring down most likely the 2018 and 2019 absolute numbers relative to 2021..

Got it. Okay. Thanks guys..

Your next question comes from the line of Doug Mitchelson from Credit Suisse. Your line is now open..

Thanks so much. Dexter, I just wanted to continue on the broadband path.

Anything you're seeing in terms of change in level of competition or promotions? Any shifts by you in your go-to-market strategy or your marketing efforts on broadband that we should be thinking about? And then sort of separately with what's going on in the marketplace today, when you think about your big three initiatives to drive broadband growth going forward, can you give us a sense of when we should see those really kick in for each? I appreciate the update you're giving in terms of how many homes passed and homes upgraded and fiber homes built.

When do those really kick in terms of driving incremental subscriber growth relative to the company's historical case? Thank you..

Yes. That’s a great question. Listen, on competition, we're not seeing elevated levels of competition across the board. People focus very much on the FiOS numbers. Last year, in 2020, in Q2, about 23% of our gross add activity happened in the FiOS footprint.

This quarter, 2021, 22% of our activities happening in the FiOS footprint, right? So we're not seeing major differences in terms of competitive environment, which is being driven by some of the larger competitors.

It is true that with the lower activities around nonpaid disconnects that we've seen in the first half, and I think that's – we've seen that across our peers as well. There is less gross add activity in general, as people are not disconnecting on on-pay basis and reconnecting with someone else, right? So gross adds, in general, I think, are down.

But in terms of where our activity is, we're still seeing some amount activity in such thing to FiOS footprint versus historical numbers. In terms of overbuild, we're not seeing any elevated levels of overbuild either, particularly in the southern footprint today. So I think it's pretty much business as usual.

If we put aside what's happening in move churn and the regulatory and storm front, which clean up in the third quarter of this year. In terms of our CapEx initiatives, the big summer months are now, which is where most of the build activity occurs.

So really mostly back-ended going to fourth quarter, which really sets us up for 2022, as I think we've signaled going into this year that 2022 and onwards, we expect to see much more elevated levels of broadband net adds. So we're going to do about 250,000 to 300,000 upgrades in Suddenlink that will get delivered this year.

Most of them were going to get delivered at the back end of the third quarter going to the fourth quarter. We've got 500,000 FTTH homes this year, and that number will increase going to 2022. And we're on track to deliver 150,000 edge-out new homes built this year.

But again, a lot those are coming online at the end of the third quarter going to the fourth quarter. So our penetration numbers of, let's call it, 40% of the first year that we see from edge-out new homes build that’s really going to benefit our 2022 numbers..

Got it. Thank you..

Your next question comes from the line of Brett Feldman from Goldman Sachs. Your line is now open..

Thanks. I'm going to stick with the CapEx theme, if you don't mind. Now that you're sort of getting back on pace with the fiber deployment, I imagine all of that or virtually all of that would be in optimum regions where you're competing with FiOS.

And so the first question would be, at what point would you expect that you would have substantially upgraded the FiOS footprint to be fiber on your end? And then when you get to that point, what do you expect to do then? Do you see merit in continuing with the fiber rollout across other portions of the footprint because there are certain cost savings? And if you're not going to do that, what would be very high on the CapEx or the capital allocation prioritization list at that point in time? And then just a quick question on the edge outs.

How much of that is building your network where new homes are being built versus expanding into areas where you previously didn't operate? And why is now the right time to do that? Thank you..

Sure, Brett. Listen, on – specifically on the FiOS fiber footprint, we expect to be built out over the next two years. So by the end of 2023, I think we would have covered the 2 million homes passed where we compete with FiOS. Thereafter, we absolutely will look to do more. There are areas that we were – that are going to be prohibitively expensive.

So it's not necessarily only in the open footprint, but a lot of our edge-out new home build or are they going to be done in fiber-to-the-home or we're going to be doing it in quasi fiber-to-the-home in our effectively basis. And so we're going to continue to deploy fiber-to-the-home actively across our footprint.

But obviously, after we finish end of 2023, the big bulk of fiber outlay will have been done. And then we'll have to look at selectively attractive ROI situations, to your point about cost savings or longer-term effects in terms of revenue effects going forward and make those choices one by one.

What else did you ask? In terms of edge outs, most of it is in terms of new homes build areas. And then there are adjacent markets that are either DSL only or are run by smaller mom-and-pop local operators where they do not have the advantage of either a very high-performing network or in terms of attractive bundled services that we have.

So most of our new home build activity today remains new areas, new homes built, particularly in the Texoma area. But we do see certain areas where we are overbuilding just purely some smaller operators where we think we have a real competitive advantage..

Okay. Thank you..

Next question is from John Hodulik from UBS. Your line is now open..

Great. Thanks. Dexter, just final clarification on the high-speed data center. Do you guys think that given the trends you're seeing as far to the quarter that you can grow high-speed data adds in the third and the fourth quarter? And then my second question is on the mobile strategy, obviously, rebranding in the Optimum footprint.

Any expectations for maybe being a bit more aggressive? I saw the 5,000 adds this quarter, but what you see as the opportunity there on the wireless side? And should we expect any sort of changes to the current strategy?.

Yes. I think the answer on the first one, where on a reported basis, we're at 12,000 year-to-date through the first half of the net adds. We absolutely expect to be data net add positive both in the third and fourth quarter.

In terms of mobile strategy, really this was based on the fact that we finally have migrated everything onto the T-Mobile network, that our churn rates have gone – have almost virtually halved in the first six months of this year.

And assuming everything continues to be on that basis, we absolutely want to get a lot more aggressive here on the marketing strategy going forward. So probably more around a back-to-school type of event as a lot of promotions and marketing activity happens through to the end of the year, we'll be looking at being more aggressive on the mobile side..

Great. Thanks..

Next question is from James Ratcliffe. Please state your company name. Your line is now open..

Thank you. It’s Evercore ISI. Two if I could.

First of all, regarding churn, how are you doing in non-move churn, so voluntary customers switching to other providers? Have you seen a shift in terms of, call it, the net flows on that front? And secondly, with the goal of 4.5 to 5 turns of leverage, what's the mix to get there in terms of EBITDA growth versus reduction in net debt over time? Thanks..

I think on churn, nonpaid disconnects have obviously done a lot better than historic levels, which makes a lot of sense given the trends coming out of the pandemic.

And voluntary churn has been pretty stable across the footprint, right, pockets here and there where you do see aggressive promotional activity, whether it be from AT&T or FiOS every now and then or smaller mom-and-pop operators. But overall, we're seeing voluntary churn stable.

But the nonpaid disconnect churn improvements are not outweighing the move churn numbers that we're seeing. In terms of leverage, listen, I think we look at this in lots of different ways.

Obviously, a shift to the share buyback strategy is really going to be very much dependent on cost of capital and where the stock is trading and those types of events and whether or not we have M&A opportunities. But it should be a mixture of free cash flow until leveraging as well as EBITDA growth..

Thank you. .

Next question is from Ben Swinburne from Morgan Stanley. Your line is now open..

Thanks. Good afternoon. Two questions, first on Altice Stream, Dexter, or Optimum Stream and Suddenlink Stream. Just can you talk a little bit more about that strategy sort of product plan? It's interesting, you guys – I know you have a lot of apps on the Altice One box.

So why did it make sense to sort of go with the streaming stick approach? And are you – have you considered a broader marketing push beyond the one-gig service? It's a product that's probably not too expensive for you guys, especially wholesale.

I'm just curious if you think about using that as a more aggressive marketing or bundling approach than what you've done so far? And then I just wanted – I was curious, I don't think anyone's asked about EBB, and there were some comments earlier in the quarter that, that was not a major driver of net adds in the quarter.

Just curious now that we have the quarter in the books, if you had any comment on the size or benefit from EBB on the net adds. Thanks..

On the stream side, Ben, the strategy is pretty simple, right? I think the Altice One experience is a great experience for those heavy users of large bundles. But the CapEx associated with that product is significant.

And with the attachment rates continuing to fall on the bundled product, where we're kind of in the high 50s, low 60s, two, three years ago, and we're kind of in the 32% to 35% level today in terms of video attachment rates.

There is a desire for our 1P broadband subscribers to have a video product alternative, that's very cheap and cheerful, right? So when you're getting your stream box for free, and the 1P subscriber, that's an attractive product for a lot of people for mainly OTT-based.

And to the extent that they ever want to get a bundled package on an OTT basis, they can do it also over the Stream product. So it's really a CapEx play. We were active also to what our consumers want and how our consumers are behaving today with most of their activity on the video side in the OTT-based.

And if you really look at what we spend and how easy to deploy stream box – Altice One box, it's a no-brainer. So there is boxes for the one type of subscriber and then boxes for other types of subscribers that we think going to help stickiness with our customers.

One gig [indiscernible] absolutely we expect to go to multi gig as we've spoken about relating to our FTTH product. Are we going to be more aggressive on bundles and marketing? Yes, I would assume so. As we go into 2022 and launch multi-gig products.

Have we started to signal what we're going to do, not yet? But we have put in our orders for multi-gig modems, up to 10 gig. And so that will be a product that we are going to deliver and launch in 2022. On the EBB front, this is a small number of subscribers.

I think we had about 29,000 applications year-to-date and we had about approvals of about 6,500 approvals. But of those 6,500 approvals only about 300, 400 are new customers. The rest are existing customers who have benefit from a subsidy..

Got it.

And that's probably too small impact – too small to impact ARPU, I'd assume, right?.

Yes, absolute time [indiscernible].

Yes. Okay. Thank you..

Next question is from Kutgun Maral from RBC Capital Markets. Your line is now open..

Great. Thanks for taking the question. A few on fiber if I could. It's great to see the accelerating momentum with the build and penetration. You touched on this a bit in a prior answer, but I was hoping for a bit more color specifically with fiber in terms of the timing of the benefits you expect to see across customer metrics, revenue, OpEx and CapEx.

In other words, given the build plans you have ahead, would you expect to see a discernible impact to your consolidated results exiting this year into 2022? Or should we think about it more of 2023 and beyond event? And just lastly, I know you are not guiding to 2024 or 2025 today, but as you move beyond the big bulk of the fiber outlays in 2023, should we expect the call it 300 to 400 million of annual fiber CapEx to roll off then? Thanks..

A lot of questions. I’ll just try and sit through some of them, which is clearly on the CapEx side on fiber-related CapEx, the big bulk of our fiber CapEx is going to be coming in 2022 and 2023. And then we should see a reduction in our fiber spend CapEx in 2024 and onwards.

In terms of consolidated, let’s call it more OpEx-related since I answered the CapEx question, OpEx-related benefits, the penetration levels are still quite small right now.

And so, I think we had always flagged that probably somewhere, maybe two to three quarters, three to four quarters from now, we'll get a better sample size, but we have already seen satisfaction incidence rates come down by about 30%. On our fiber subscribers.

We know that those numbers can improve from there significantly given our experiences in other geographies around the world. And so, we know that there is going to be a positive effect. I don't think – I think the numbers are too small today for us to even to flag anything immediately.

But it's probably something more of a 2023 effect where you'll start seeing hopefully some meaningful effect. In addition to the fact that service-related visits, as well as calls into the call center, continue to reduce nicely as we saw that in 2020, that is continuing to 2021.

And with the continued investment in network here and in products, we expect hopefully those numbers continue to fall. So, there's a bunch of initiatives here that are affecting better service-related OpEx numbers..

Thank you..

Next question is from Jonathan Chaplin from New Street. Your line is now open..

Thanks. A couple of quick ones. So, we saw DISH get an incredible MVNO from AT&T Dexter. I'm wondering if that is an opportunity for you guys as well, to improve on the MVNO that you've got with T-Mobile at the moment by shopping it around the alternative that I've thought about in the past is finding somewhere to hop into the Comcast, Charter MVNO.

It seems like theirs is pretty compelling as well. And relatedly, I'm wondering if you can give us a sense for what the fixed cost base in mobile is, or kind of what's driving costs in that business at the moment should cost stay flat from here, and you – as you grow subscribers and revenues you are going against that cost.

Or apart from your MVNO cost is their other variable costs that we need to think about? And then unrelatedly, the reports on uplink pressures in parts of your network. And I know some of your brethren are looking at an upgrade to 1.2 gigahertz with a high split.

Is that something you guys need to think about in portions of your network as well? Or is it obviated entirely by the fiber-to-the-home and you sort of get by with what you've got until you go fiber everywhere? Thanks..

A lot of questions. Just on the MVNO listen, yes, absolutely, we continue to always monitor what else is going out in the market. TMO has been a great partner very constructive on a whole host of issues with us. And so, we like our partnership what we think economics can improve and we continue to have discussions with them.

So, I think we are aware of what's going on. We do get inbound calls from people on that. But we also are very, very happy here currently with TMO. On the cost space, there is really two variable factors obviously one is the direct costs with our roaming charges and the second is marketing costs, right.

And so, we are keen to bring this business to EBITDA breakeven to positivity by the end of next year. We are, as we have said, 70% of our gross ads are now taking a per gig product which is very nice margin, positive product. And only 30% of our base is taking unlimited. And today about 80% of our base is unlimited and 20% is on a per GIG basis.

So those numbers are going to flip as those numbers continue to flip in the right gross profit profile. All the incremental quarter-over-quarter, the numbers are getting better and the only variable cost is really a cost of marketing costs.

So, as we see churn rates come down, customer services in metro cities and onboarding experiences get better and better. And we continue to deliver attractive margins for all of our new subscribers. That's really going to do we put a push on marketing every now and then to drive volumes to accelerate that pace? That's really the thing to look out for.

On upload speeds, listen, we made some changes in certain of our footprint on upload speeds. Those upload speeds, our new upload speeds that we're moving towards are on par or better than any of our peers. At the same speeds we just were a major outlier in terms of our current upload speeds pre changes.

The changes were really getting driven by some heavy, heavy usages by certain users who were, let's call it, hoarding a lot of the bandwidth. And so, this is going to allow us to provide a much, much better uniformity and service across certain number of footprints there.

But to your point, this is really a short-term thing, particularly in the Optimum footprint relative to our fiber deployment, where many of the communities that have raised their hands on this announcement are going to get overbuilt with fiber over the next 12 to 24 months.

So, we have signaled that to the relevant regulatory elements in various neighborhoods and states. And so, I think this is just more of a PR story than it is affecting any of our customers in terms of the services that they are receiving..

Got it. Thanks Dexter. .

Next question is from Craig Moffett from MoffettNathanson, your line is now open..

Yes, hi. Dexter, I wonder if you could just talk a little bit about broadband pricing. You talked about the competitive environment and proportionality earlier, but it seems like your broadband prices are now somewhat higher than Verizon's.

Can you just talk about what experience you have when your prices are lower or higher than Verizon that is in sort of places where you compete in different environments? And how you think about customizing pricing to the competitive environment in individual geographic areas?.

Yes, I mean, listen, I think Craig, we monitor our broadband pricing very closely. We are consistently usually $5 to $10 cheaper when you add in all the fees and the modem correlated fees there.

So, that's really not where we're seeing our pressure from Verizon, where we do see pressure from Verizon is on their marketing campaigns where they start adding free OTT services aggressively adding on gift cards and adding on bundling discounts with wireless.

So, the combination of those three things OTT freebies, gift cards, and the bundling is where we see pressure, right? When you come in aggressively on those fronts those are all obviously starting to see on a combined basis, a lot more attractive pricing relative to what we have, right.

So, there are lots of different things that we look at to counter that. But if look just purely on video pricing today, they are $15 to $20 higher than ours. And they are redistributing those $15 to $20 of higher ARPU into more aggressive marketing campaigns on broadband, right.

So, there are a lot of things to look at in terms of what we can do, but that's really the driver, it's not really about pure one fee broadband pricing, we don't see pressures on a daily basis on just unique one fee pricing..

How much flexibility do you think you have to price differentially in areas where you are up against FiOS versus not? I would think sort of from a regulatory perspective, that's challenging sometimes..

I'm sorry, Craig, say that one more time?.

Just how much flexibility do you feel like you have to price differentially in areas where you are up against FiOS versus where you're not? I think from a regulatory perspective I can imagine that it might be somewhat challenging to have significantly different prices for different competitive market..

Listen, I think we review pricing for, let's call it less competitive areas regularly as we do for competitive areas. We want uniformity in our pricing, particularly geographically in states and in regency, contiguous regions. But sometimes we'll have differential pricing depending on where we are.

And there are reasons for that, maybe cost because of less dense areas our cost of servicing of areas are a lot higher and those types of things. So, there are a lot of factors come into our pricing strategy. But clearly regulatory is a factor that we are aware of as well as just local environment, local competitive environment issues..

That's helpful. Thank you..

Next question is from Brian Kraft from Deutsche Bank. Your line is now open..

Hi good afternoon. I wanted to ask a couple of questions on the Lightpath and advertising side.

For Lightpath, can you talk about the opportunities you see with the acquisitions that you've announced in the Boston area and also the expansion in Queens? How should we think about the impact on Lightpath growth going forward from those things? And then can you maybe just talk about your expectations for news and advertising in the second half of the year, given the tough political comps, but the much easier core comps? Thanks..

Yes, Lightpath, we've not spent a lot of money. I think we spent about $40 million on various small business acquisitions or just buying some networks or some IRUs. But I think this is an outsized opportunity for us to make overtime meaningful moves into new markets and get outsized returns on very small investments.

So, these are the things we like that the new management team is putting in front of us. Clearly, if there are larger things for us to do, we will absolutely look to do that. We think that we're right on the right path here to deliver much higher growth numbers. I like that. It's going to take a little bit of time, I think, the acquisitions are small.

2022 I'd be surprised if we saw a meaningful move in topline from new areas. But I suspect in 2023 onwards, we will do. So, this is a good story to monitor. The numbers are small today, but they could get bigger. So, we liked what the management team is doing.

On news and advertising, we're cautious of trying to manage expectations to anything more than the 2020 medium advertising numbers because we have a $16 million political comp difference between 2020 and 2021. So, if we can do as well as 2020 and slightly better that would be great. That would be a very, very good news.

And then we'd go back into political cycle in 2022. So, the thing is that John Steinberg and his team have been doing have been great. They have been able to obviously Q2 has been a big quarter relative to last year because of the down a quarter relative to COVID.

But we're growing our business across all of our divisions and making up for a big loss of political revenue this year. So, expectations as opposed to be revenue flat, to hopefully slightly up..

Got it. Okay, thank you very much..

Next question is from Andrew Beale from Arete Research. Your line is now open..

Hi. I just wanted to come back to your flat organic data net adds and the move churn and non-pay disconnect commentary. I mean I think second quarter normally has a drag from college seasonality in Suddenlink.

And obviously, you mentioned the 14,000 adverse move churn from the settlers back to new city and 7,000 extra non-paid disconnects on regulatory storm.

So, I guess my question is which parts of your franchise are you seeing the obsessing positive net ads this quarter against these multiple drags? And whether you can talk qualitatively about the Optimum and FiOS overlap growth versus the non-overlaps franchises? And whether there's anything to say about Suddenlink growth ex-students seasonality, or perhaps you've done something differently about the way those student contracts work?.

No, listen, I think, Andrew probably the disproportionate amount of increased move churn we're seeing is in the Optimum footprint. That shouldn't be a surprise there. So, I think, the Suddenlink footprint, as you rightly mentioned, historically Q2 does see a very elevated levels from new churn because of all the college towns that we have there.

But we are seeing most of the disproportionate amount of new churn affecting the Optimum footprint. So that's really the key item there..

Right.

And the positive offsetting that’s there in net adds is coming mainly where?.

Well, I think, we're seeing continued, nice, elevated activity and growth coming from the Suddenlink footprint, right. So, the gross ad activity continues to build very well, which is why we feel good about our job strategy and our upgrade strategy at Suddenlink..

Okay, thanks..

Your last question comes from the line of Michael Rollins from Citi..

Thanks, and good afternoon. I was looking at the disclosures around broadband consumption for the broadband-only users. And it looks like it was down sequentially for last quarter at about 618 gigabytes to about 558. And I think on a year ago call, you may have referenced a number at about 550 gigabytes.

And so, I'm just curious if you could share some observations in terms of what might be impacting a sequential downtick in usage or the deceleration in growth year-over-year? And what this might mean for the future direction, whether it's for the consumption of your customers or how this might or might not impact the type of speed cheers and spending levels that they subscribe to with Altice?.

I mean, I don't think we have a real read as to 5% or 10% differentials here other than the upward trend continuing to go in the right direction. I think there could be something to be said about people being less at home going forward and maybe kind of back to an office type of levels.

But the expectation is we are going to continue to see those usages rise. Now, one of the things to remember is that as the attachment rates on video continue to fall, we're seeing a lot more 1P users, right. So, the sample size is growing a lot quicker than it has historically.

And so those 1P usage, I would assume, probably drag down the meeting a lot more..

Thanks. .

You don't have any more questions, presenters, you may end the call..

Thank you very much, for joining, everyone. Do reach out if you've got any follow-up questions. Otherwise, see you virtually, I suppose, in the next few months. Thank you..

Thanks very much..

Thank you. Bye..

This concludes today's conference call. Thank you all for participating. You may now disconnect..