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spk01: some of the competitive dynamics and the tactical strategies that, you know, we'll continue to evaluate, but the vast majority of them that were employed in late 23 and early 24, the stabilization comment is related to sequential ARPU.
spk05: And then if I could ask a quick follow-up on the broadband subscribers, I think maybe last quarter or perhaps fourth quarter, but I think you had talked about, you know, the year-on-year improvement in, you know, in net ads. kind of continuing to accelerate as you kind of, you know, you're blocking and tackling or your go-to-market strategy was tweaked a little bit in order to kind of, towards initiatives that would accelerate subscriber growth. Is the expectation at this point that you can, that that can continue, that the pace of change or the pace of improvements in underlying broadband subscriber growth can continue while ARPU stabilizes? Thank you.
spk08: I'll jump in there and talk. Feel free to tag along. Yeah, I mean, I think when you look at the second quarter as sort of an example, despite the headwinds from the expiration of ACP, we still had a quarter that was dramatically better than last year, same period. And our connects have been improving on a year-over-year basis. This is the third quarter that that's happened. And our churn is also at all-time lows. So I think we are learning, we are calibrating, we are leveraging, we are taking those learnings and putting them to use. So our focus is absolutely, as we've talked about in the past, on a phase growth plan. And the first phase of that is really driving growth, unit growth specifically.
spk05: Thank you.
spk08: are a part of that, obviously.
spk00: Our next question will come from the line of Frank Wilden with Raymond James. Please go ahead.
spk03: Okay, great. And just to back on the ARPU question, should we think of Q2 as sort of the low and it kind of bottoming from there, or will it be more, you know, maybe drift down a little bit and then maybe grow in the back half of 25, something like that? And then when you say you're targeting certain customers, you know, how much longer can you do that? And when you talk about these customers, are these some of the bigger customers, national players, or more some of the smaller regional ankle biters?
spk01: Frank, I'll kick off. I would say, again, on the ARPU side, it's a stabilization factor sequentially. Getting into, like, you know, sense on that relative to up or down is not the guidance we're going to give. But I think with some of the initiatives that we have in place, the stability and growing customer base that we have, SON's ACP, we feel very confident in that, not only just through the balance of the year, but even as we're into the next quarter. And then on the customer side, from a competitive perspective, as we mentioned in the past, The tactical strategies were very specific to certain competitors, certain competitors that in most cases were new. In most cases, not in most cases, in all cases, we knew where capital access was, cost of capital, go-to-market strategies, and we were able to employ specific strategies against those competitors. So I won't put them into a specific defined category that you use, but you can probably, you know, take away from that, you know, the types of specific competitors that we were focused on there.
spk08: And just to follow on, so, oh, never mind.
spk03: Well, go ahead.
spk08: I was going to say to give an example where, you know, when we go up against small overbuilders with these targeted offers, We have seen wind in that there may have been press releases about other markets that they were going into that have been quietly taken down. And so that is the sort of result that we are seeing from those targeted efforts.
spk03: Got it. Okay. Thank you.
spk00: Our next question will come from the line of Steven Cahal with Wells Fargo. Please go ahead.
spk02: Hi, this is Dan on for Steve. I'm unfortunately going to beat a dead horse here, but back on broadband ARPU. The stabilization commentary is helpful, but, you know, looking back historically, we've grown ARPU in the mid single digit range. So, you know, would you expect to return to these levels of broadband ARPU growth over time, or should we expect a more persistent level of promotion and targeted pricing actions moving forward?
spk08: I don't, well, we're not going to give specific guidance, but I think the idea of growing in a mid-single-digit range over the long term is something that we'd be looking forward to. But we're in a phased growth plan at this point in time, so that starts with stabilization. So again, as part of a long-term plan, sure. Right now, stabilization.
spk01: And Dan, I'll just add on that. I'll just add on that, Dan. It's Todd. You continue to see more and more discipline in the market across all operators. I mean, there's still a select few that you scratch your head at from time to time, but as it relates to pricing discipline, you know, return on invested capital for these highly complex, extremely costly to build, especially in these rural markets, costly to operate, you know, networks and we believe, as Julie alluded to in her remarks, that that will continue to be a discipline that's required as it relates to long-term returns for invested capital, whether that be, you know, public capital or private capital. Got it. Right.
spk08: Demand for connectivity, both speed and data, and you realize that there are lots of opportunities for monetization in the future.
spk02: That's helpful. And maybe just as a quick follow-up, could you update us with where your fiber overlap sits today?
spk08: Yes. We currently are sitting at 42% of our markets overbuilt with fiber.
spk04: Thank you.
spk00: Our next question will come from the line of Kowalyn Paramaguru with BNP Paribas. Please go ahead.
spk06: Hi, thanks for the opportunity. First question is on ACP. Can you just try and quantify for us how much of the impact this quarter was from churn and how much was from gross ads declining in the market? And secondly, we noticed you have added a new risk factor related to MBI in the filing. I know you've been reluctant in the past, but please can you try and give us a little bit more colour around the potential size of the outlay here? or multiple for this business given it's so material for shareholders? Thank you.
spk08: I'll start on the ACP question. We noted in our comments that the 4,000 lost during the second quarter of the 48,000 total ACP customers was on the disconnect side. We did not quantify the connect side. But given that, you know, we stopped selling ACP in the first quarter, And our connects are still up. And actually about a third of our connects in the second quarter came from what I would call our value segment, which I would assume is very similar to ACP customers. And the majority of those folks took 300 meg services or higher. So we did not quantify the connect side, but rather the disconnect side.
spk01: And then on the MBI side, I will reiterate a few things I've said over the last couple of quarters as it relates to an event, well one, an event that we expect to occur if nothing else changes according to the agreement we have in late 25, early 26. We did outline in our prepared remarks that the call option has expired as of this quarter on exercise. That put option is in Q3 of 2025. We've been actively planning for that. Our commentary has been very centered around our confidence in the ability to affect that transaction without even the need to go to the capital markets. Yet we will remain very opportunistic in looking at capital markets. We have a very diversified access strategy and a very proactive long-term strategy to ensure we have excess liquidity, long-term maturities, cost-efficient capital, and we're actively evaluating those. But that's something that we feel very comfortable can be executed within our historical operating leverage of 2.5 to 4.5 times. Is it going to be towards the higher end of that range? Acknowledging that, but well within that higher end. if that's helpful. That's helpful. Thank you.
spk00: Our next question will come from the line of Craig Moffitt with Moffitt Nathanson. Please go ahead.
spk07: Hi, thank you. Two questions, if I could. First, I know I've asked this question in the past, but I thought, just given how much convergence is on everyone's lips, I'm wondering if you are thinking at all about how you might add wireless to your consumer offering and whether there's anything to discuss on that front. And then second, do you think that your competitors who are building fiber in your footprints are making money? Todd, I think I know you well enough to know you probably have a pretty good guess about what they're spending in cost per home passed. Is it your sense that they are still overbuilding at a positive return on capital?
spk01: I'll start with the latter, and then I'll let Julie speak to some of the convergence. Craig, thanks for the question. And yeah, we have spoken a lot about that. I would say I think it's important to note that while, you know, Julie alluded, you know, we have 42% overlap from fiber, and that's both with incumbent fiber as well as new entry, you know, overbuilt fiber, that that pace has continued to increase. In spite of that, our DISCOs and our connects, as Julie was outlining on the call, uh are at uh really healthy you know improvement levels on the disco side it's it's actually for q2 uh a a low for the last six years if you take out the pandemic years of course and we think that that's actually a great testimonial to how we're performing against even this increased competition as it relates to the economics what's been built to date was probably where they're going to get you know more disciplined economics and where maybe in many cases you had access to lower cost of capital over the last three years We know the cost of capital has changed. We know the access to capital has changed with the exception of maybe a few of the larger scaled players. And we do expect that when you start to get into cost per home and then the overall labor cost to operate, which I think so many people fail to think about as it relates to how do you operate a highly rural, low density in a, you know, efficient operating cost structure that, that the, The areas that have not yet been built will probably be built over a slower pace over time because of the economic dynamics we talked about.
spk08: And jumping in on convergence, it's interesting to watch today to see where wireless companies are either building or buying wired providers. I think that suggests something interesting to us all. And I think we continue to muse over the utility of a wireless and wired bundle, either to the customer or to the companies that are providing them for the long term. That being said, the MVNO possibility is something that we look at and model and remodel multiple times a year. to check and see, it needs to be economically viable and compelling to both us and our customers over the long term to jump into that. And we think that there are, that is just one of the products and capabilities and partnerships that will serve customers and be monetized by companies like ours over the long term. If we do decide to jump into the wireless world, I think we have options available to us that get us off to a relatively quick start. So time will tell, Craig.
spk07: All right, thank you.
spk00: Our next question will come from the line of Brandon Nispel with KeyBank Capital Markets. Please go ahead.
spk04: Great. Hey guys, thanks for taking the questions. Hoping you could help us. Understand your expectations for broadband to travel girls in the second half of the year. Maybe some comments in terms of July. Julie, are you guys positive in July? And then just bigger picture, when will we start to see penetration go up? Obviously that's the goal of this program in terms of changing strategy. So hoping you could help there, thanks.
spk08: Yep. Well, I would point us all back to our focus on growth, on a phased long-term growth plan, on increasing penetrations across all customer segments. That is what we are focused on. And remind you that, again, despite the headwinds that we experienced with ACP expiring, We're making steady progress on that. I don't think you're hearing about connects being up over year over year, over three quarters, or customer growth like you are hearing from us because of our focus and the fact that these initiatives are gaining momentum. Disconnects being down as well, but not going to give specific guidance about what sub-growth will look like in the second half. Only that that is what we are focused on. And as Todd said at the end of his comments, we're always working for you. That is our branding tagline. And I think that the reorganization that we've recently accomplished is part of making sure that that focus comes to life in a very bespoke way in each one of our markets.
spk04: Got it. Thanks.
spk01: And Brandon, I'll just jump in, Brandon, if you're okay. You know, as it relates to what is, I think, a really compelling incremental opportunity for us, you've seen our passings increase. We talked about in the prepared marks of about 35,000 year-to-date. You know, on an LTM basis, that's over 75,000 homes a meaningful amount of those are in our existing markets. And these are in our existing markets where we see really strong, well, really strong maybe be a little bit of a stronger term, but, you know, stronger than what we've seen in the last couple of years, developments from, you know, economic, you know, stimulus, economic growth, new builds, new housing permits, Texas, Northern Arizona, South Carolina, These are some areas yet still very rural markets that are seeing some really strong growth areas, and we can capitalize on those. And these are capitalizing on them in markets we've been in for years with a very strong brand with highly upgraded networks. And so that's the best return on invested capital market. you know, we can allocate towards and then we can capitalize from a growth perspective. But as we all know, when you build those, you're not just a connection a day away, right? So that lags a little bit. But as Julie said, with our reorg and the changes that we've made there, we're really powering that growth through, you know, that local approach and those local leaders.
spk04: Got it. Thank you. And if I could just follow up, just so that we are all perfectly clear. You guys said stabilization in ARPU in second half. That implies that there could still be sequential declines in ARPU, or it could be sequentially positive in 3Q, 4Q.
spk08: Don't think comment.
spk04: All right. I tried.
spk01: I think the initiatives we've put in place gives us confidence in that stabilization factor, and sequentially that should be seen in Q3.
spk04: Thanks, Todd. Thanks, Julie.
spk08: You got it, Brandon.
spk00: I will now turn the call back to Julie Lawless for closing remarks.
spk08: Thank you, Regina. So before we conclude, I want to extend my gratitude to our associates. Their energy, dedication, and ability to navigate this ever-changing environment has never been more evident. I am incredibly proud of and thankful for each and every one of them. Thanks, and we look forward to speaking to you again next quarter.
spk00: And this will conclude today's call. Thank you all for joining. You may now disconnect.
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