WOW's broadband losses stabilize in Q1 as operator weighs take-out offer

WideOpenWest reduced the rate of broadband subscriber losses in the first quarter of the year amid ongoing buildouts in greenfield areas and to adjacent areas. WOW execs did not take questions on Tuesday morning's earnings call and provided no additional color on an acquisition offer that surfaced late last week.

WOW lost just 400 high-speed Internet customers in Q1 2024, improving on a loss of about 2,900 subs in the year-ago quarter and a loss of 13,300 subs in the prior period.

WOW CEO Teresa Elder attributed the improvement to several measures launched during the quarter, including an increase in the minimum downstream speeds offered to existing subs (to 300 Mbit/s) and upgrading customers on its 500 Mbit/s tier to 600 Mbit/s. She also attributed the improvement to new, simplified pricing introduced on February 1 that features an optional price-lock, no data caps, no contracts and the inclusion of a cable modem.

The company expects to return to broadband subscriber growth over time. But that isn't expected to happen right away – WOW anticipates losing between 500 and 2,000 broadband subs in Q2 2024.

Total hybrid fiber/coax (HFC) revenues rose 1% to $106.2 million, and the average revenue per user (ARPU) in WOW's HFC footprint rose 5%, a number the company expects to rise as the year progresses. Elder said ARPU in Q1 was impacted by a proportion of new customers buying lower-level speed tiers, but it was partly offset by a rate increase that took effect across its legacy markets late last year.

WOW made some progress on its strategy to build fiber-to-the-premises (FTTP) networks to new, greenfield areas (currently focused on parts of central Florida; Greenville, South Carolina; and Michigan) as well as "edge-outs" to areas that are adjacent to WOW's legacy HFC footprint.

In Q1, WOW passed an additional 15,100 new homes in its greenfield markets, extending that total to 45,500, and added 3,000 new homes through edge-outs.

(Source: WideOpenWest Q1 2024 earnings presentation)

Elder said the penetration rate in WOW's greenfield markets hit 12.5% in Q1, up from 10% at the end of the prior quarter. WOW is averaging 20% penetration within the first six months after service activation in its greenfield markets, she noted.

In the edge-out areas, the 2024 "vintage" notched a penetration rate of 32%, "albeit off a low base," Elder said. WOW realized a penetration rate of 27% in the 2023 edge-out areas, and 31% in its 2022 edge-out areas.

WOW's pay-TV base continues to erode. The company lost another 11,500 video subs in the quarter, up from a year-ago loss of 6,100. WOW ended the period with just 79,300 pay-TV customers. By comparison, WOW ended the quarter with 489,700 broadband subs.

The decline enters the picture as WOW continues to phase-out its own pay-TV service and leans on a partnership with YouTube TV.

WOW has yet to announce any subscriber data for a mobile service it launched in mid-2022 in partnership with Reach. WOW's mobile offering rides on the T-Mobile network.

Committee to review take-out offer

Execs spent little time discussing an unsolicited, non-binding acquisition proposal from DigitalBridge and Crestview Partners, WOW's largest shareholder. They're offering to snap up all of the outstanding shares of WOW that Crestview does not own for $4.80 per share.

Elder only reiterated that WOW has created a special committee of independent directors to evaluate the proposal. Analysts at KeyBanc believe a competitive bidder might step in.

Financial snapshot

WOW posted total Q1 revenues of $161.5 million, down 6.2% year-over-year. That was paired with a net loss of $15 million, narrowed from a year-ago loss of $38 million.

Q1 capex rose $12.5 million to $72.5 million, due largely to edge-outs and greenfield network builds.

WOW ended the quarter with just $27 million in total liquidity ($19.2 million of cash and $9 million available).

Looking ahead, WOW expects Q2 revenues in the range of $158 million to $161 million, and high-speed Internet revenues of $104 million to $107 million.