Good morning, everybody, and thanks for joining us. I'm very excited about our next speaker. He'll be new to many of the people on this call. Vishal is the Chief Strategy Officer and EVP of Wholesale at Frontier. He joined Frontier just nine months ago after being Director of Strategy and Wholesale at Vodafone. Vishal, thanks so much for joining us. No, very happy to. Very much looking forward to the conversation, Jonathan. Yeah. What attracted you to Frontier? Oh, how long do you have? Let me get going. Look, first and foremost, I spent a good number of years watching the European telecommunications industry develop. You know, over the last few years at Vodafone in particular, I was responsible for all the deals we struck to gain access to fiber and fiber broadband technology as that became available. I saw firsthand, you know, the disruptive and almost once in a generation impact that fiber is having and will have in areas where it hasn't been, you know, fully deployed. The first thing that really attracted me to the Frontier opportunity is really the story of fiber and the potential of fiber in the United States, the early stage where we are in the overall journey. That's kind of... You know, as a strategist, it's always exciting to be part of a transformational journey, especially if it's industry-wide. Yeah. The second reason was I'd obviously worked with Nick Jeffery before, so that was very exciting. Equally, I was very impressed by the quality of the team that Frontier had put together post-emergence. I mean, John Stratton, what a legend of the industry. but also Veronica Bloodworth, who's probably built more fiber than anyone else in America. You know, you put that together with Ettienne Brandt, John Harrobin, and some really, really good people on the team. Scott Beasley, you know, bringing that real entrepreneurial, pragmatic approach to things. The team was quite exciting and was a different, you know, kind of a different type of environment to being in a large corporate. Frankly, that brings me to the third thing, which is, you know, it was time for an adventure and what more than, you know, jumping into a new country, new continent with a new kind of, you know, fiber story to kind of get stuck into. Has Dallas been an adventure for you? Oh, yes. I mean, You know what, for those of you who have not been to Dallas, please do come. It is definitely different to what sort of people who've never been to Dallas think of. It's actually a beautiful city. I used to live in suburban London before I moved, Jonathan, and what I found is there are many, many similarities. It's very family focused, very family friendly, great schools. Yeah, I'm a big fan so far. The weather is even better too as compared to where I was before. That's, you heard it here first. There are big similarities between London and Dallas. Never would've expected it. To start off with, I'd be really interested in some perspective on the debate amongst senior leadership around the decision to slow down the fiber build from 1.6 million to 1.3 million homes this year. Would love to kind of understand, you know, how that debate shaped up, what the pros and cons were, and what ultimately drove the decision. It's an important debate, so let me unpack it a little bit, for us all here. I think first and foremost, it's worth making the point that we're actually not slowing down. We built 1.2 million passings last year, and we will build 1.3 million this year, so it is actually an increase in the rate of build. Last year we built, more passings than we were intending to, so over a two-year cumulative period, we'll be there and thereabouts, in any case. What's more important is, if you unpack the hood, you know, most commentators, most analysts will focus very much on the build number. It's an important number to focus on, but there are actually multiple engines that need to work in sync to get your returns working as an engine, as an overall engine. The first is the build engine. You know, how many homes have you built? The second is the sales engine. How quickly are you selling, you know, paying customers at the end of that? The third engine is really the installation and service. You know, how quickly can you get your field tech scaled up? Not just scaled up, but scaled up, delivering a good experience at home and keeping your intervals or the number of days that customers have to wait between a sale and an install to an acceptably low number. What we found as we've scaled up the build engine is that we actually need to scale up all three in sync. Some of those other engines, in particular the installation engine, they don't scale as quickly necessarily as the build engine. You've got to, you know, double down in certain areas, increase effort and focus in other areas. If you keep all three growing in sync, then you can do what is really core to our thesis, which is, scale our fiber presence, but do it as efficiently as possible. That's kind of like the mantra. You know, the thing, Jonathan, to keep in mind is, it's not really a sprint building the amount of fiber that we need to build. It's a marathon, and we have to set ourselves up to have, you know, the most efficient, strong and robust build, sales, and install engine over the period of our build. Got it. It sounds like the bottleneck was the third piece, which is installations. Is it sort of a labor issue, or a process issue? Is it fixable? Can you know, put yourself in a position to accelerate further in 2024? Is it a fixable issue? Absolutely. Right? Keep in mind, you know, two years ago, the, you know, Frontier was emerging from Chapter 11, had not really built much, if any, fiber or installed significant amounts, you know, prior to that. These are new muscles and capabilities that we've been building over the last two years. We've scaled it. Some parts are labor-intensive, and we're scaling that. Some parts require process, right? Process fixes and improvements, end-to-end. All of those things are kinda being worked on. Can it be scaled further? I think that's what our ambition is, you know. As we hit the 1.3 number this year, we hope to build at least that going forward. We'll be continually looking to, you know, improve the capability and robustness of all of those three engines, including the installation engine. Is getting to 10 million in 2025 still on the table, or would you say it's just, you know, getting to that number on a certain date just isn't that important? It's really about building efficiently and getting the right returns once you get to 10 million. I think the most important thing is working towards getting a committed build of 10 million. That's our priority. Yeah. With the most efficient build possible. Right? Now, I think we're on track for the sort of timeline we've mentioned before, but the priority is really getting to 10 million and doing it as capitally efficiently as possible. You know, getting to $10 million obviously is the priority. At some point last year, Nick and John were talking about $10 million-$12 million. Is that incremental $1 million-$2 million still on the table or have the changes in the cost environment made them less attractive? No. I think, you know, we've always been conservative in when we've talked about the overall size of our footprint and the potential within it. There is still the $1 million-$2 million that we described earlier. It's valid to say that there is still more returns potential in our overall footprint beyond the $10 million that we've committed to. Our priority is first to get to the $10 million, and then frankly, once we've got a large and successful build engine up and running, you know, there'd be optionality for us to then look at other ways and other means for expanding beyond. Look, priority is the 10, to do it capitally as efficiently as possible, but opportunities do remain beyond. We heard from, you know, a few of the private equity investors who have backed some of the big private assets in the space that build costs are up somewhere between 10%-20% in the, in the U.S., even more than that maybe in Europe. It sounds like it hasn't risen as much as that for you, at least maybe not, you know, as much as the high end for you. What have you been able to do to keep the build costs, at that sort of $1,000 per home passed level? I think when we, you know, at the outset, when we commenced upon our multi-year build program, we signaled a sort of a cost per home passed sort of range of $900-$1,000. Yeah. I think, you know, we, along with the rest of the industry, have experienced inflationary impacts. I think it's fair to say we've probably gone from towards the low end to towards the mid to high end of that range. Yeah. We've managed to keep it within that range. Your question is kind of how, and there's multiple things. You know, we've been continually looking at process improvements end-to-end, which, you know, idle times and things like that really do result in increases in cost. That's been a lot of internal operation execution focus. Also, I think the benefit of being first out of the gates, being one of the largest builders of fiber, allows you to have stronger agreements and relationships with your vendors now. Whilst I can't get into some of the details, Jonathan, of what those relationships include, we have got agreements that cover the period of our build. We're in a robust position to, let's say, navigate short-term, you know, sudden changes in the environment. Got it. give us a sense of, you know, the cost of capital is up. It's higher than you expected or we expected a couple of years ago when you embarked on this build. The cost of deployment is up, though it's within a manageable range for the, for the reasons that you've mentioned. How should we think about the interplay between the cost of capital, cost to deploy, and the number of homes that are that are attractive? Are you accepting a lower return but still positive on those 10 million-12 million homes? Or are there other inputs in the model that have shifted, that have enabled you to keep returns where they were before? I think, again, the shift on the cost side, Jonathan, has been within the tolerance of what we've broadly modeled. We've, I think, previously mentioned that, the sort of, returns across the period of our build are in the mid to high teens IRRs, and they remain so. Our overall aggregate cost of capital is around 7%. I know you can double-check that figure with Scott. The result is that the overall project across the period of the build still remains quite attractive and quite lucrative from a returns point of view. Clearly, you know, as we build more and more fiber, we have more evidence and proof points in terms of rate of penetration. As our, you know, most recent pricing strategies and effectively, starting to walk down a more output-accretive approach starts flowing through, I think we'll see more evidence points behind a strong return across the base. Got it. For the $3 million-$4 million that lie beyond the $10 million-$12 million that you can upgrade yourselves, how many of those locations are gonna be eligible for BEAD funding? I'd love to be able to answer that question. Unfortunately, I have to wait until the updated maps and details are released by the FCC, which we hope to receive sort of middle of the year, you know, and very soon. It's not that far away. We're obviously very excited and very much looking forward to understanding and unpicking those details because, you know, if grants and subsidies enable us to achieve good IRRs, right, in areas beyond where it's commercially sort of within our target range and then that helps us. We'll know more in a few short months. I would imagine, you guys have a sort of a much better bottom-up understanding of the locations that the FCC and the state should be funding. You know, based on your internal analysis, how many of the 3 million-4 million locations do you think the FCC should be funding? Now, we have a view. We have a view. It's a working view. I'm not gonna be able to say too much about that today, Jonathan. I have to wait until, you know, we're absolutely sure what comes out. As you know, the FCC has also had this process of challenges, right? Where if information that it releases not, let's say, agreed to or validated by the underlying operator, you need to be able to go through that process. Just in order to make sure that we can have a full, clean process, I won't say anything now, but I will say you're absolutely right. We've done quite a bit of detailed modeling. We have a sense of the fact that there is an opportunity in that space. We do need to see details come out, and then we'll work the process. It's an important opportunity not only for us, but for the other ILECs in the space. It's a great once in a generation opportunity to kind of, you know, bring connectivity to places which are suffering at the moment, right? Yeah. you know, more details in, I hope, only three more months. The, you know, there's obviously, I would imagine, a pretty compelling opportunity within your footprint. What about adjacent to your footprint? Will you guys be looking at markets that are close to or adjacent to markets that you operate in as today to pursue BEAD funding? The priority remains our footprint because that's where we have, you know, the most sort of significant cost and operational and execution advantages. Yeah. You know, it and for those individuals who are listening and are very familiar with network design, sometimes in order to reach the area where you want a subsidy, you have to pass, you know, other areas and homes along the way, and that might make it economically advantageous or useful to do small scale, you know, edge outs or expansions, but very much anchored by the grant of the subsidy, which is very much gonna be focused on the footprint. Anything else would be purely opportunistic, where sort of, you know, costs and synergies enable it. Hopefully that gives you a sense of the way we're looking at it. Yeah. Help us sort of understand how it would work from a resource management perspective as well. We talked a minute ago about the challenges in building the machine that can parse, sell, and install homes. If you ended up getting 2 million of BEAD-funded homes, the state's gonna be gonna want those to be built out within the next sort of 4-6 years. How do you fold that into the organic build? Does the organic build get pushed out while you use available resources to do BEAD, or could you increase it sort of above that 1.3 million pace materially to accommodate BEAD, and still keep the organic build on track? The best thing is our committed build or our organic build, as you phrased it, the committed build of 10 million remains our core priority. It's what we've committed to. It's what the core of the thesis is based on. We actually anticipate, given the timing of the BEAD process with details emerging midyear and then, you know, a process hopefully through the rest of the year, but potentially into early 2024 in terms of the actual grant distribution, we think there's a very strong likelihood that the vast majority of our committed build may well be complete by the time the window for a subsidized build opens. That may enable us to really kind of almost transition from completing the committed build and then deploying build capacity towards the subsidized build. That's a concept, Jonathan. You know, once the details emerge over the next few months, we'll be able to understand it more fully and if prioritization is required in terms of resources and targeting, we'll be very thoughtful about that. Obviously, we'll try and optimize as much as we can, but the priority will remain the core committed build in that instance. We're seeing the cable companies that have won some of the state-funded builds generating returns that are in the mid to high teens on edge-out builds. I would imagine that the returns for you upgrading existing infrastructure would be even better than that, if you were to get sort of similar economics in BEAD. Is that correct? Sort of the follow-up question would be, if it is, and if you have to choose between organic builds and state-funded and BEAD-funded builds, if the BEAD-funded builds generate returns that are just as good, might you not prioritize that, those over, some of the organic builds if you're faced with needing to make choices in the context of scarce resources? Look, Jonathan, there's two parts to your question. I think, the first part is, look, if there is, let's say, limited resources, I need to prioritize where those resources go into in terms of building, you know, however that may be. We've always mentioned that we'll be thoughtful, we'll be intelligent stewards of capital. Which means that if there's a high return available in a certain part of the footprint, well, okay, we'll have a look at that, right? So it'll be really based on understanding footprint or almost zip code by zip code or cluster by cluster, the returns potential. That's been our methodology so far. We'll continue to be going forward. So that's what we mean by being thoughtful and intelligent stewards of capital. Coming back to your question on BEAD, you know, I can't comment on the cost economics that cable providers are using and you know, how they're designing their particular network, nor can I really comment too much upon the assumptions they're making on the returns. I think for us it really depends on a number of factors as to whether the return is higher or not versus elements in our core build. There are quite a few unknowns, and in particular, the amount of subsidy that is made available, which is a fairly important driver. The other thing, Jonathan, to keep in mind is everything that's happened today has not been BEAD. It's been, you know, subsidy programs that are precursors or different programs, state-sponsored or other federal programs, which have slightly different rules, and you know, kind of, levers, as opposed to what BEAD will be when it comes. We still do have to a little bit see what comes out, you know. Would I, would I love to have amazing returns to the BEAD program? Absolutely. You know, if that creates a, a positive problem of too many high returning, properties to build to, you know, Jonathan, bring that on. That would be a great problem to have. Not a, not a bad problem to have. I mean, I hear your desire to not count chickens. Let's see how the whole program comes together. At a high level, it's looking pretty exciting for somebody in your position. We're sort of looking at, based on the initial modeling, cost per home passed a little north of $5,000. If you take the $42.5 billion and divide it by the 14 million locations that have been identified in sort of version one of the maps, it looks like the net CapEx opportunity in these markets could be really compelling. You know, I totally understand not wanting to get ahead of yourself and sort of seeing how it all. Keep in mind, I think, keep in mind, Jonathan, when you look at the, high-level, $42 billion is an exciting opportunity for, you know, I think for the nation, frankly, given the, the unlock potential that fiber does have, right? Economically from an education and community connectivity potential. In many of these situations, you know, a lot of that investment will go to backhauling, to middle mile as well. It's all the stuff en route to get to the actual, destinations. Then that's also where topology and, you know, who else is around and which ILEC potentially is closer to those clusters becomes interesting. Number of dynamics that would need to be, you know, looked into, Jonathan. It's not as easy as taking it on an average basis, which I would love to do if I could just say, "Give me that number for home passed." It is exciting, and it is important for us to thoughtfully look into it. I think it is a positive that it's gonna happen. It's gonna happen hopefully very soon. you know, assuming that there is a compelling opportunity of, you know, maybe a couple million homes within your footprint, how do you fund it? Well, that's a great question, right? Because how do you fund it? We have, you know, we have some good sources of funding that cover our core and committed build, right? Depending on the timing, right? Depending on the timing of when the build is required for BEAD purposes, there may be a potential to continue funding it the way we have. We have also got other vehicles, other sort of, let's say, avenues of funding that we could explore. Specifically for, you know, federally underwritten investment into infrastructure build, there are a variety of sort of third-party financial sponsored structures that we could entertain as well. Those would be within the sort of, you know, solution space, for us to kind of consider. Look, once again, we'll know a little bit more of the quantum, the timing, and therefore only after that, the funding solutions required, once the details come out. There are, you know, there are multiple ways to ensure that we are able to fund this once in a generation, opportunity. I'd love to sort of unpack that in a little bit more detail. Undoubtedly, if the returns are sort of mid to high teens, there'll be funding available. What we'd love to see is funding vehicles, where the upside is retained by the equity holders in Frontier. Can you sort of go into your thought process, since I'm sure this sort of falls squarely within your remit, around sort of potential funding vehicles. Is there an opportunity in government underwritten builds to sort of fund off-balance sheet with debt funding and not give away a lot of the upside to equity partners outside of the Frontier equity? Is sort of, you know, giving away equity in these builds inevitable? Our clear preference is to own what we build, whether it's our core build or whether it's, you know, government subsidized build. Yep. That would be our priority. It's full ownership, full return to Frontier and its shareholders, its equity shareholders. We may, depending on timing, on the quantum, not be able to do all of that through the, as a result of the leverage that's required. Having said all of that, if we think of it as a once in a generation opportunity, the opportunity becomes a little bit binary, which is you can have a portion of a return on subsidized build, or you can have none of the build, I think that's the sort of solution space where off-balance sheet structures become important. We'd explore how do we maximize the value to the parent company in all of that sort of structuring. Look, a number of thoughtful trade-offs to be done as we get closer to it. You're gonna have 10 million-12 million that you're gonna upgrade organically some number of BEAD, that will be funded with federal dollars and state-funded builds as well. Then there's gonna be a piece in the middle, I would imagine, that doesn't make sense for you to upgrade, isn't gonna be BEAD funded. What happens to that piece in the middle? That's gonna be sort of firmly within your remit to figure out as well, I assume. I was wondering when you were gonna ask that. You were being very forensic. You've done the $10 million, you've done the 1-2 additional, the BEAD. Where I was like, "When is Jonathan gonna ask me about the rest or the remainder?" Look, the practical reality is that in many of those markets, we have customers that they're actually returning, you know, decent amounts of cash flow. They're good markets to hold for now. We'll continue to serve them. We'll serve them as efficiently as we can. Longer term, you know, we have to see how many of those markets may be supported by some form of BEAD investment, which maybe then transforms the market from a, you know, copper only to potential fiberized market. If not, then we have to, you know, as you pointed, Jonathan, you have to think about where they end up. You know, do we continue to keep them until they become so small that they're not significant anymore, or do we divest them in some kind of asset swap with others? All of those options remain on the table in the medium to longer term. In the near term, they do all generate cash, which is very, very helpful for us, and they do have good customers. We continue to serve them as efficiently and as well as we can. Got it. In your last role at Vodafone, you competed in markets that were largely converged. And sort of much of the M&A that drove that convergence must have happened during your time at Vodafone. I'm super interested to get your perspective on convergence. Can Frontier remain competitive, without a wireless offering? As you can imagine, we've, you know, across the team and myself included, there's a lot of experience in the wireless space. John Stratton, Nick Jeffery, John Harrobin, who ran, you know, large chunks of Verizon's consumer wireless team, Ettienne Brandt. We know, Ettienne Brandt, who was at BT and EE before this. We know what happens or what's required to run a good wireless company. We also know well the impact of convergence, and I looked at convergence so deeply. It was days and days of my life when I was at Vodafone in Europe. We've looked at it thoroughly here as well. What we see, Jonathan, is at the moment, there isn't really a material impact that we see in terms of bundling having an effect on fiber and fiber ads. Fiber is, still remains a scarce asset from an asset perspective. From a customer and consumer uptick perspective, it really is a winning product. You know, we continue to watch this very carefully and as in when we think that there's a shift or a material shift that's having an impact on fiber ads, then I think we'll be in a place where we'll be able to decide what to do. The second thing is we've obviously understood and done a lot of thinking around, you know, the economics of MVNOs and launching an MVNO. Whichever way I cut it, at this point in time, every extra dollar that I have is worth putting into fiber than into putting into an MVNO, right? It's just the re-relative returns profile is different. Again, you know, something that we continue to look at and periodically check in on, but not needed just yet. We're out of time, but I've got one question that I can't let you get away with without asking, which is, you know, on the fence on convergence, I, I get it, no clear evidence that you need to do it yet, but if it does become a necessity, scale is gonna be really important. In this once-in-a-lifetime BEAD opportunity, I would imagine, scale is important. Do these forces accelerate the process of M&A, amongst the fiber players in the U.S.? Two things: consolidation and BEAD. Fiber and consolidation, the fiber market, I think many commentators and observers think it's likely to happen over time. The industry and sector we're in, it's, it really does lend itself to economies of scale. The more you are able to build, the better, you know, your entire ecosystem is, the stronger your brand is, the kind of momentum that you get in terms of driving uptake. We do see, we do expect to see fiber consolidation play out at some point in time, yeah. You know, we're large enough to potentially be a consolidator of smaller fiber players. We're also small enough to be consolidated by or be acquired by another larger player. We'll just have to see how it plays out. We are building our... this company for scale, so scale in its operations, scale in its contracts with vendors, scale in the ambition as well, you know, to build to the 10 million, but then prepare ourselves for more. I think that will play out. Whether or not BEAD drives that is a second question, and that we have to see a little bit in terms of the magnitude and specificity of the rules. I'm a little bit more circumspect as to whether BEAD drives consolidation or is just an attractive opportunity in addition to the general dynamics within the sector. Hopefully, that makes sense. No, it does. Vishal, this has been awesome. I really appreciate your time today and the conversation. Thank you very much. Thank you. It's been a pleasure. Hope you guys have a great rest of the day. Cool. Thanks.