I'm not sure where we got these chairs, but, wow! Okay. Yeah, that actually works. Thanks everyone for joining. I'm Batya Levi with the communications team at UBS, and our next speaker is John Stratton, Executive Chairman of Frontier Communications. Thank you so much for being with us. Oh, thank you. It's my pleasure. Great! There's a lot to talk about, but I thought maybe we could just, given the time of the year, if we could start with your strategic focus and top priorities as we head into 2024. Yeah. Thanks, Batya. You know, when we look ahead at 2024, one of the things I like to do sometimes is you look back and then you say, "Okay, where are we now? And how does the path forward go from here?" And in the case of Frontier, you know, our history as a newly emerged company is relatively short. You know, we emerged from bankruptcy in April of 2021, and at around that time, in the summer of 2021, we established what we thought was a fairly straightforward, reasonably compelling strategy, which was to build fiber, sell fiber, improve what was a broken customer experience, and then also improve our operating efficiency. So we had a lot of work to do on a very fundamental level. And, you know, just to sort of provide some sense for how that's gone, you know, on build fiber, since the time we got started, we have expanded our fiber passings by about 90%. And in order to achieve that, we positioned ourselves as what is actually the second largest builder of fiber, only to John Stankey and AT&T, as the second largest fiber builder in the U.S., and the largest pure play fiber provider here, in America. In terms of selling fiber, we've expanded the customer base by about 45%, during that same time frame. And on the customer experience, I will tell you that this is probably the most important area of focus for our management team. And literally, since the day, our new team came into their roles, they've had this exquisite focus on improving the customer experience. And their progress is evidenced by what has been an extraordinary improvement in our Net Promoter Scores. Our continuous improvement on churn performance and other indicators of satisfaction are all pointing in a really positive direction. And then lastly, on improving our operating efficiency, we set a goal there too, of course, and the goal originally was for us to eliminate $250 million worth of costs from our run rate, if you will. In fact, at this point, our expectation initially was to do that by the end of 2024, and here we are, coming to the end of 2023, and that number is actually doubled. We expect to achieve $500 million in cost elimination by the end of this year. So, you know, all of that sort of operational improvement has begun to show itself in our financial results, specifically in our EBITDA, which has been now growing in 2023 by about, you know, low to mid single digits. And 2023 will be a little bit of a watershed year for us. You know, it's been more than 10 years since Frontier has grown EBITDA on a year-over-year basis, and it is absolutely our expectation that this will be the year that we break through and deliver EBITDA growth for the first time, what we expect will be many, many years to come. So that kind of points us to 2024. And what I would tell you is that, you know, based on all the things I've just described, we feel we have good momentum in the business. We feel that the strategy is working very, very well. We know that the most important thing we can do to create shareholder value is to convert the old copper networks to fiber, and then to dramatically move to sell those networks and to improve the business in the manner I've just described. So that will remain our focus. We will keep leaning into those four fundamental pillars that I just described: building, selling fiber, improving the customer experience, and our operating efficiencies. That's a great start. I would like to go through each of them a little bit deeper, but the milestone that you laid out sort of, a few years ago in terms of EBITDA growth, reaching EBITDA growth this year, you achieved it. A lot of people were skeptical. So going forward, can you help us to think about what are some indicators in the business that we should be looking out for to see that you're on the path to reach those steady-state goals? Yeah. Yeah. You know, for those of you who may not follow us as closely, when we talk about steady state at Frontier, what we're describing is when we get to the point where we've completed the build of our 10 million fiber passings, when we've penetrated those 10 million homes and businesses to the level of 45% penetration. And at that time, our expectation is that we will be generating $4 billion of EBITDA annually, and we'll be generating free cash flow in the range of $3 billion or better during that same period. So obviously, these are great goals, and we have nice momentum, as I said, and have high confidence in our ability to achieve them. But in the manner that you just described, we said back in 2021, that 2023 would be the year that we would break through and deliver EBITDA growth. We had some, you know, skepticism, as you mentioned, but we're very pleased with the ability to achieve that. So now the question is: Well, how do we track continuing progress? And the way we look at it, and the way I would suggest investors might wanna look at this as well, is to focus on a few very important key metrics. And of course, probably number one, there would be our ability to grow customer revenues. Now we're on a good pace there. In 2023, we'll grow our consumer fiber broadband revenues by about 22%, and this year we'll be growing just under 20%. So nice growth there. And now we've also edged into ARPU growth, which, you know, was a bit of a lagger for us, but is now coming on nicely. So we're at 2% in the third quarter, and we see good upside growth for that number to continue to expand. So customer revenue, of course, is gonna be the thing that's gonna be most important to driving ultimately bottom line results. And, you know, the sheer shift of our base from copper to fiber, as I mentioned before, is a very critical component of that, you know, sort of momentum. And that leads to the second measure, which is margin expansion. And so investors should be expecting us to deliver margin expansion, particularly as we shift a greater proportion of our business onto fiber. That alone, just based on the superlative underlying unit economics of the fiber network, should provide us with natural expansion to margins. But also, the relentless focus that I referenced earlier on improving operating efficiencies, automation, digitizing everything from beginning to end in the customer life cycle will deliver similar efficiencies. And, you know, maybe one other that was a bit of a watch item, maybe at this time last year and in the beginning of 2023, that was talked about quite a lot, and maybe a bit of a headwind for us, was the question of: Would Frontier be able to source capital at an affordable rate? That is to say, at a rate... A cost of capital that would allow us to complete our build to the 10 million homes that we had promised at the rates of return that we had articulated back in 2021. It was a reasonable question. I do think that the asset-backed securitization, the fiber securitization transaction that we did back in August, effectively has answered that question. You know, what we've shown is a clear path with access to capital at a reasonable rate that will allow us to not only complete the fiber build, but to generate the rates of return, you know, we've said mid-high teens that we expected. So, you know, the net of all of this, keep growing the revenues, EBITDA expands. There's a natural deleveraging that happens as a consequence of that. We get towards the end of our build, capital comes down, free cash flow is released at a really, really, healthy rate. When you set these goals, we were in a different macro environment. So given the change in that and maybe higher inflation, and also maybe the change in the industry dynamics, two years ago, we weren't talking that much about Fixed Wireless Access as a competitor, you know, in broadband. So how do you think about these goals with the changes that we've seen in the market? Yeah. It's, it's amazing it's only a couple of years, right? Because it has changed so dramatically. You know, when we think about the fundamentals in the macro environment, the economic environment, particularly, rising interest rates, increased levels of inflation, this has put pressure on everyone in our space. You know, we think about it in terms of, the cost to build, we think about, access to supply chain, and costs of capital. You know, these are all pretty critical, enablers, for long-term success for anyone in our space. I have to say that I am, really, encouraged and pleased at the work that the management team has done, to overcome, those, those challenges. You know, I think we have certain advantages in terms of the relationships we have with our supply chain partners. We were a bit of an early mover, Batya, in this space. When we first began to ramp up our build in mid-2021, we were among the first to really go in the fiber space, so that gets you somewhere in terms of those relationships. But I have to say also, our outright scale, you know, building at a pace of 1.3 million passings per year, gives you the kind of leverage that is also pretty helpful. And then lastly, as it relates to the cost of capital, I referenced the securitization move that we made back this past summer, which has allowed us access to a new pool of capital at a reasonable rate, and gives us a clear path to those mid- and high-teen IRRs that I referenced earlier. Okay. Yesterday's news, where Jana repeated its call for a strategic review of the company. Can you talk about how you're thinking about strategic decisions? And maybe if you could touch on, like, how would you balance M&A, or selling the company, or maybe divestitures of certain assets? How should we think about how you'll approach to this letter? Sure, sure. You know, first thing I would say is we are highly attuned to M&A and the strategic landscape in which we operate continuously. But further, you know, we have an ongoing dialogue with our key shareholders. We listen very carefully to their feedback, to their input. We value their perspective. We take it quite seriously. Now, of course, as a matter of policy, we don't disclose the content of those conversations publicly. But what I would tell you is this: our board is very much focused on the opportunities that are right in front of us. What I would say also is that we are very willing to explore all alternatives that may be present for us to achieve our number one objective, which, of course, is to achieve maximum value creation for our shareholders. Okay. Everything's on the table. Everything's on the table. Okay. Maybe moving on to the fiber build-out. There's going to be availability of BEAD funding coming in, potentially early 2025, is what our panel said yesterday. How are you thinking about that opportunity, and how would that sort of ramp up your current pacing, potentially? Yeah, BEAD, we are very, very excited about BEAD. We think this is a once-in-a-generation opportunity for the U.S. to bring the benefits of broadband connectivity to places that otherwise may never see that. Places where it is sort of economically unfeasible for a carrier with just private funding to go and build out. So, as you would expect, we've assembled a really good team of folks inside Frontier who are very much dedicated to working through all of the twists and turns of the BEAD process. It is, I think that the governments are going about this in the right way, but it's not easy. You know, so it starts at a federal level, and then distributions out to the states, and then even down to local jurisdictions. It is fairly complex. There are thousands and thousands and thousands, literally, of jurisdictions that will make determinations about the release of funds and the build as it goes. That's why it's taken a little bit of time, but I think it's worth doing, and this is something that we expect to be very active in terms of our levels of participation as we go forward. In terms of the penetration target that you laid out, 45% of your passings, there is also some debate if you can get there or not, given the changes in the industry. You've already achieved 44% in your base footprint. Can you talk a little bit about expectations for the remainder of the cohorts that you're building? Are there any differences we should think about? How do you feel about that 45% target? Yeah. Well, again, just for the benefit of those who don't follow our story as closely, when we refer to base fiber networks, we're talking about the roughly 3.2 million passings that we had when we began our journey, our transformation journey. That is what was previously built. We sort of firewalled that 3.2, and then we began the expansion process, which will ultimately be a total of around 7 million additional what we call the expansion network. So, we have set a target, as I referenced earlier, of 45% terminal penetration across the whole of it, and as you mentioned, Batya, in the third quarter, we announced that we have already achieved 44% penetration of the base fiber markets. And so that gives you a pretty good sense for how we perform in a competitive environment. And that is really the ultimate sort of enabler of success, right? What does that competitive environment look like? And what we find is that in 86% of our footprint, we have either one or no gigabit-plus capable competitors. And that competitive dynamic is in play both in the fiber base, the base fiber networks, as well as in the expansion network. So very, very similar in terms of the competitive set. And then the markets themselves, the market characteristics, all the things that we look at in terms of the attractiveness of our service look very, very similar in the remaining 7 million as they do in the first three. This is what gives us great confidence in our ability to get to 45. Got it. In terms of the—maybe if we dig in a little bit to the competitive environment a bit, again, fixed wireless is, you know, it's a service that we weren't talking about much before, and AT&T, for example, just said they weren't pushing fixed wireless much, but their DSL footprint, which continues to decline, maybe could be a good base to sell into fixed wireless. So in—when you think about your DSL footprint, and you're going to convert them onto fiber, but are you seeing incrementally more competition from fixed wireless that maybe doesn't give you that opportunity to convert? Yeah, fixed wireless, and we watch this unbelievably closely, as you would guess. Fixed wireless has, to date, had very limited effect or impact on our overall, operating results. What I would tell you is that, in terms of where we might see it, I think, we've seen virtually no sense for fixed wireless access in our fiber footprint, period. Where we may see it is sort of at the edges in our copper networks, DSL networks, as you've referenced. And I think it's probably reasonable to say that it's most likely affecting the gross add velocity in those DSL markets. That could be a combination of factors there. It could be the effect of fixed wireless access. It could also be the fact that we're not really investing in gross add expansion in those markets. We're rather devoting our efforts to growth of our fiber access networks, as you would expect. So I think it's pretty limited, and ultimately, our success as a company is, we're very clear on this, is going to be our ability to build and sell fiber. And so the question is, does fixed wireless access in any way impact our expectations for success in the fiber markets? And I just, I don't personally believe that fixed wireless access is a compelling proposition for consumers of bandwidth in the residential context, and I'll tell you why I say that. If you look at our most recent data, consumption in the household of data services is now at about 1 TB per month, which is an unbelievably big number, and it's growing at a fast rate. In fact, the top decile that we have in our fiber base is now consuming close to 2 TB per month. So this is sort of extraordinary, and numbers that I wouldn't have imagined possible, not even that long ago. But it is natural because you see changes in the way people are consuming data. The decline in linear video and the move to streaming services, of course, high-definition streaming services, where multiple devices during the course of the same timeframe in a household are all streaming high-def video, participating, utilizing VR, multiplayer gaming and the like. These are bandwidth-intensive applications that are driving that growth rate to such a level that is just remarkable. And I wonder about the ability of ultimately the size of the addressable opportunity for fixed wireless access, giving that reality. Because as we think about that number continuing to expand, the pressure that that would put on a wireless network to deliver that level of connectivity, that level of bandwidth delivery is felt in three places. The first, of course, is do you have the spectral capacity? And I know everyone talks a lot about that. Is the radio access network sufficiently scaled to deliver against that kind of volume? And people think about this in terms of, well, I'm building to my peak hour. Whatever I do with fixed wireless access, I want it to just be sort of incremental revenue against no dedicated cost. Okay, that's good to a point, but people have to remember that the busy hour in mobile happens in a different place than residential. You know, I've built for 25 years, built wireless networks on highways, urban centers, airports, sporting venues, you know, those kind of places where people have a use of mobile. When you start to look at building out networks to serve a residential user, it's an entirely different place. And so you get back to the questions about radio access networks, but also even the fundamental wireline architecture that has to support that for fronthaul and backhaul. When you begin to dedicate, capital and expense to the delivery of those services, I think they flip into a negative direction economically, right away. Right. So thinking about the 45% penetration, you pretty much expect to split the market with cable companies. Cable growth has stalled quite a bit recently, partly because of macro reasons, partly because of increasing competitive pressures. How do you think about competing with cable? And in a scenario where maybe... Do you expect them to be more aggressive with pricing or promotions or bundle with wireless to reignite the growth? Yeah, listen, I think it's been a nice run for cable. I would have loved the opportunity to compete with DSL with a cable product for, what was it, a decade plus, a pretty good, a pretty good proposition. You know, clearly the markets have changed, and I think, when we, at least as we think about it through our lens, as we bring fiber networks to bear, competitive dynamic changes completely. Broadband is a competitive business, and I think we'll see all of the players will pulse in and out with different promotional offers and pricing changes and things from time to time, which is pretty natural. But our fundamental proposition is, again, pretty straightforward, which is to provide the best possible product at a really attractive price. What we know is, if we look at the example of our core fiber networks, we're gaining share continuously in those markets in the face of fixed wireless access, in the face of cable bundles with wireless and the like, and yet here we are at 44% and growing. So it gives us great confidence that not only in the core markets, but in our expansion markets as well, our ability to continuously grow our penetration rates and capture share is dependent upon our ability to deliver a really great value to consumers. Do you think you need a wireless bundle as well to more effectively compete with cable? I don't. We haven't seen no evidence that that's needed. And look, if we did, and again, this is another one of those areas that we really need to keep an eye on because the market's dynamic, and it may change over time. We have not yet seen evidence that our pure play fiber position as we face the market has limited our ability to grow, and that ultimately is the arbiter of our success. If we felt there was a change there, certainly, between myself and Nick Jeffery and many of the members of our senior team, there's enough wireless experience there, I think we'd know what to do. But realistically speaking, the very best use of capital that we have is to put every dollar we can into the conversion of our copper networks to fiber, and then to drive hard on building and penetrating those markets. So I prefer to be undistracted, if you will- Mm-hmm. and allow us to run hard at this pure play fiber positioning, and we'll see. If a change is warranted, we'll certainly consider that. On the business side, as you deploy more fiber, are you seeing some traction on the SMB market as well? Yeah, we are. You know, and that's, you mentioned SMB, which is really specific and exactly the right place that we need to focus our energy and attention. For a long time, the prior Frontier company pursued large enterprise business in the B2B markets, which is really not a natural fit for us. You know, we know what we are, and I think we try to be smart about competing where we have an opportunity to provide a really good outcome for customers in the company. And so to compete against the likes of AT&T and Verizon and others for multinational enterprise accounts makes just- Right. No sense. So, so we've pivoted our focus. We've shifted to small business, medium-sized enterprise, and with an idea that they should be companies that have most, if not all, of their locations on our owned and operated networks. So yeah, fiber is an important part of the story. Just like on the consumer side, the shift from copper to fiber is really critical. And we showed in the third quarter, across our business and wholesale lines of business, 5% growth in revenue on the fiber side of the business, which is sort of an early indication of what we think is possible. Now, in the case of that business, is a bigger legacy copper revenue stream that we've got to overcome, and so, you know, what we'll be focused on in the next couple of years is stabilizing the overall revenue proposition there. And that's something that we said about a year ago, that we expected in 2023 to achieve just about equilibrium on the overall revenue stream, and we've largely accomplished that. I think it's gonna be a little while before we get to reliable top-line growth overall in broadband, excuse me, in the B2B markets. But certainly, as the fiber continues to grow and as the mix shifts, we should see that catalyzed growth. Right. Maybe shifting to the pricing side, you did mention that ARPU growth was slower and it starts to pick up a little bit. How do you think about the overall pricing strategy? Is there room to keep increasing prices? Actually, cable is increasing prices. Yeah. Or is the opportunity just as you shift the customers to higher tiers, and that's where—what's going to drive? Yeah, it's a bit, it's a bit of both. You know, we have a simple pricing strategy, which is to provide the best possible product at a really attractive price. And the definition of attractive price, of course, is part of the market evaluation, the dynamic around us. We've made a number of moves in the last year to adjust our approach to pricing and value creation. You know, we had for a long time have been quite dependent on leaning on use of things like promotional gift cards to drive acquisition at the front end, which was putting a dampening effect on our ARPU growth. But we've eliminated those gift card promotions, for example. We've added to the speed tier, so we introduced a five gig product across the network earlier this year. So in combination with two gig and one gig, now, that's beginning to drive uptake of higher speeds. We actually unbundled what was our value-added services combination. So we took a number of value-added services that used to be just sort of in a free bundle, and we've broken those out and actually put premium charges against them. And the results have been pretty extraordinary. You know, we have a situation now where our customers are choosing gigabit-plus speeds in the high 50% now, which is a really remarkable rise in terms of that take rate from just where we were a year ago. The value-added services that were free a year ago are now being attached at the point of sale at a rate of 40% of at least one value-added service. So, you know, the combination of these things, we've set an expectation for the fourth quarter of, like, 3%-4% ARPU growth, and we do have high confidence that we'll be able to grow ARPU at a similar rate in 2024. Great. Maybe shifting to the cost side. You like you mentioned, you achieved about $500 million in cost savings, double the amount that you had laid out a few years ago. Now the question is going to be, okay, what's next? But first, on that incremental cost cutting, where did that come from, and how do you think about sort of operating leverage going from here? Yeah, it's funny, I said to Nick Jeffery and Scott Beasley, "Well, the good news about getting this first bit of accomplishment, $500 million done by the end of 2023, is that you got it done. The other side of that is now you need a new goal," you know? Because we're about 30 days away from, "Okay, now what happens?" But what I would tell you is that it's been no one particular source. It's been sort of a full team effort across the whole of the business. Literally, every function has contributed here. And in the beginning, it is, you know, what Nick would describe as stop doing dumb things. You know, there were areas that we weren't being particularly careful with the way we were operating the business or the way we were expensing things. So it's like, okay, eliminate those unnecessary expenditures. And then it gets harder as you go, but still very rich in terms of opportunities. Automation is certainly a big part of that. I referenced earlier this maniacal focus on improving the customer experience, and that has certainly been reflected in the levels of customer satisfaction that we see, NPS, et cetera. But the other side of that is it also improves our efficiency. So our call volumes, customers calling in with a problem, an issue, a complaint, have dropped by 30% this year versus last year, and that's while we grew the customer base by 19%. So that is just an extraordinary outcome, and it sort of, sort of indicates the sort of interconnectivity of these objectives. I would tell you that another really deep and rich opportunity for us is in field service operations. That is to say, you know, our folks that go out and work with customers on installation, maintenance, and repair. You know, eliminating unnecessary truck rolls, or in some cases, eliminating the need for a truck roll by utilizing remote technology to troubleshoot and repair a customer issue, even sometimes anticipating issues before they manifest in the customer's living room. So a lot of those efforts will continue. We haven't yet published or described a number for what's our next goal, but we will. Okay. We absolutely will. Okay. And in terms of the like, if you step back and think about the connectivity market in general, there is a view, maybe a school of thought, that things converged offerings and converged connectivity is what's going to happen in the next phase of, you know, communications in the U.S. And some think that, no, these are going to be separate sort of businesses. How do you think about sort of convergence and the need for gaining more scale as you think about the next 3-5 years for Frontier? Yeah, it's certainly an interesting time. I think that convergence can happen in any number of ways if it does indeed occur. You know, one would be what I think of as sort of geographic convergence, where, you know, the wireline business begins a bit of a roll-up, you know, where you gain scale, wireline-specific scale. And we saw that, of course, in the cable industry. I experienced that in the wireless business back, you know, 20 years ago, as we scaled a number of national players. So that is certainly a possibility, and then, as you mentioned, fixed and mobile convergence is becoming a more interesting part of the overall market dynamic here, and that could be another source of convergence. So as we think about that at Frontier, you know, I think we're in a pretty interesting position. What we know is that as any of these scenarios play out, that the scarcest asset of all is fiber, and the most valued is fiber. And of course, in our position as the largest pure play fiber provider in America, we think that we're in a pretty interesting position here, regardless of how these scenarios play forward. Right. And the ABS transaction that you had over the summer, kind of, like, highlights the value of the fiber asset. Do you think that we'll continue to see similar deals, maybe for the industry, or is there more opportunity for you to tap this? Yeah, that was a real breakthrough for us. It was something that we worked on for a long time, and the team did an exquisite job in bringing that deal to fruition. And I think it served a couple of purposes for us. Particularly, one is, it provided us with clarity in terms of the path to fully funding our fiber build. It certainly expanded the access in terms of the pool of investors, investment grade-oriented investors, long-term investors who would come into our capital structure. And then, as you raised, Batya, it also highlighted the value of our fiber networks. For investors who are thinking about our long-term potential, you know, one of the things that was, I think, really interesting in the process of our doing the securitization is, of course, we had to reveal a lot of specific operating results in the territory that we were securitizing, which was the Dallas market. 621,000 passings. And what investors can see as you peek under the covers there, is a business that has achieved 46% penetration. We've had 3% or better ARPU growth for the last five years, EBITDA in the range of about 60%, and an incredibly resilient free cash flow that has been deemed investment grade. So if there's any question about what does our business look like in its steady state, you know, the Dallas market's 20 years old, that's the sort of definition of steady, is a pretty good example of what our expectation is for the whole of our business. And, you know, as it relates to, you know, capital raise and availability of additional capital as we go forward, the securitization was for 620,000 passings. We have 3.2 million of those just in our core fiber, our mature core fiber network alone. And then, of course, as we continue to build new fiber, and as it matures, the asset pool expands. So that's a really good one for us. Now, I will say, and Scott Beasley has said this many times, our goal is to, over time, to have a nice balance between securitization and traditional corporate debt, in terms of providing us the maximum level of flexibility in our capital structure. All right. Maybe one final question, just bringing everything together, and as we think about your priorities for capital allocation and the strategic review, kind of like, how would you balance CapEx, leverage, reaching your free cash flow targets? What are some final thoughts you'd like to leave us with? Yeah. It's... You know, the path in front of us is quite clear. We know right now we're in the midst of our heaviest investment phase, you know, the building fiber. And we know that every household that we flip from copper to fiber creates wonderful value. So we're gonna continue to press hard and to drive hard at that. The selling fiber dimension here, where we're growing the revenues and building the book of business around those fiber networks, then allows us to expand our revenue, grow our EBITDA, and naturally de-lever the business through that process alone. As we look forward, then as we come to the end of our fiber build, we see a dramatic drop-off in the capital intensity of the business, which then gets us to a point where we can release free cash flow in a really significant way. So we have great confidence in the path that we've chosen for this business. It's not complicated. It's not easy- Mm-hmm. ... but it's not complicated, and I think that, the focus of our team remains, rooted in the assurance that, we are doing everything we can to, deliver the build, the sell, the improvement of service, and, the operating efficiencies that are gonna be necessary to deliver this, value for our shareholders. You know, our ultimate goal is to get to that point where we're generating $4 billion of EBITDA, we're kicking out $3 billion plus of free cash flow, we're decreasing our leverage, and we're returning cash to shareholders. This is a great outcome. That's great. Thank you.