Good day, thank you for standing by, and welcome to the Altice USA Q2 2021 Earnings Conference Call. 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 have 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, without which we couldn't and wouldn't have been able to navigate the pandemic as well we have. Starting on Slide 3, we saw an acceleration in revenue growth in the second quarter to 1.7% year-over-year, with a particularly strong rebound in our News and Advertising business. We continue to deliver high broadband revenue growth, up about 8% year-over-year, although we have seen elevated move activity recently as consumers returned to home locations as well as the foot traffic impact of several pandemic-related regulatory programs and hurricanes. 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 of $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 2021 financial outlook. Looking at Q2 revenue growth in more detail on Slide 4, you can see an acceleration from the first quarter, growing at 1.7%. Residential revenue was flat year-over-year as the customer growth slowed 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, up 36.4% with a much easier year-over-year comparison. Turning to Slide 5, focusing our Residential business. We reported organic net loss of 12,000 residential customer relationships, excluding Morris Broadband's acquisition, which separately added 35,000 unique customers since we closed this acquisition in the quarter. To provide some context, the second quarter is usually seasonally weaker for us. But as I flagged earlier, we did see a noticeable pickup in new churn as markets are reopening more widely. This includes customers leaving our suburban footprint around New York and going back to New York City, which remember, is outside of our Residential footprint. For illustration, the move churn 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 net additions rather than moving close to 0. Additionally, in the quarter, we disconnected about 7,000 customers for nonpayment that was previously protected by pandemic-related regulatory programs, namely the FCC Pledge or New Jersey Executive Order or those affected by prior hurricanes in Louisiana. In other words, without the impact of elevated move churn and pandemic programs in storms, we would have been at plus 21,000 data net adds and plus 7,000 customer relationships for the quarter. Recall that New York was the latest state to prevent us from disconnecting customers with legislation enacted in May this year. While this new rule was listed at the end of June coinciding with the end of the declared COVID-19 state of emergency, it has led to some customer and revenue disruption, which will carry over into the third quarter. We've now finally been able to resume our normal disconnect policies across the whole company, and so our trend should normalize by the fourth quarter. However, if elevated move churn persists as we in fact continue to see it recently, it may be difficult to match historical 2018 and 2019 organic broadband customer growth for this year. Against this backdrop, our strategy remains the same, which is to achieve faster broadband customer and revenue growth by accelerating the pace of new builds and network upgrades, including our fiber rollout. We are expanding our footprint, and we'll be delivering services which are consistently better than those offered by our competition, which sets us really well for the next few years. On Slide 6, we would like to provide an update on some data usage trends. Average monthly data usage per customer was 445 gigabytes per month in Q2, with broadband-only customers using closer to 600 gigabytes per month. Video truly remains the biggest driver, accounting for about two-thirds of data usage, and this is also helping drive demand for higher broadband speeds. 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 there. 42% of our gross additions are taking 1-gig broadband speeds in areas where it is available. We've been 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, we continue to upsell customers to higher broadband speed tiers. Our 1-gig customer penetration increased to 11.3% in Q2, up from just 3.7% a year ago. Our average download speeds have nearly doubled in the past 3 years to 316 megabits. And as you can see, that blitz is accelerating as customers are increasingly taking 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 homes built, mostly edging out around the 70 footprint with more broadband inorganically adding another 90,000 homes packed 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 outgoing network into new areas. So we're getting a very good return on this investment. Separately, we are continuing to upgrade existing homes in the southern footprint in areas where customers previously only received a maximum of 150 megabits per second, taking up to either 400 megabits or 1-gig. On the right, you can see in Q2, we reached about 1.1 million fiber homes passed ready for service. We are still on track to pass 0.5 million homes this year with a material pickup right now in the summer months. Our penetration of fiber passings is now up to 4.3% compared to just 1% in Q2 2020. About two-thirds of our fiber growth adds are taking our symmetric 1-gig product, which is our best service available today, but we are focused on making multi-gig speeds available as soon as possible and should start marketing fiber more actively in the 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 the Android TV operating system. Customers want access to a wide range of content, including over 50 streaming TV channels and all of the most popular streaming apps preinstalled, with thousands more available in the Google Play store. The new Stream device is available for free for broadband-only customers who take our 1-gig service or the highest broadband speed available in their 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 our plan to align all of our connectivity brands, including Suddenlink eventually under one national Optimum brand. Recall, we recently migrated all of our active mobile customers to T-Mobile's network. And as we're seeing now 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'm pleased to say revenue trends continued to recover across our SMBs and Lightpath businesses, as customer growth has been much better in recent months. In fact, Q2 saw our best ever SMB customer net adds in 4 years. Business reopening activity has been accelerating as vaccination rates increased and operational restrictions drop. Restaurants, theaters, health spas, travel and tourism are examples of businesses and industries that started to reopen more widely in Q2. The swing back around the New York tristate 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 K-12 and college kids safely go back-to-school, we believe this will be the next big step-up for the economy and our B2B business. During the quarter, Lightpath also announced the expansion of its network into Boston through 3 acquisitions and new organic fiber build. This strengthens Lightpath's presence across Tier 1 markets 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 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 mayoral and New Jersey gubernatorial election races. We still expect revenue for the whole of 2021 will be flat on a year-over-year basis though, as we will have a tougher comp in the second half due to the political pull. 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%. In looking at year-over-year variances, recall 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 back up 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 quarter 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 that 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 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 our 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 $1.5 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 repay a portion of the drawn revolving credit facility. We have no annual bond maturities 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 of our 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 5.3x. We are at peak in 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 4.5x and 5x. We expect cash CapEx in the 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.

You have your first question coming from the line of Philip Cusick from JPMorgan.

First, I guess, for 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 '18, '19 level?

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, we flagged this on the last call, and I think we flagged to some with some of our shareholders that 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 3,700 that are going to affect coming into the third quarter. And if we take kind of our historical save rate in terms of undisconnected clients that have been balance forgiven and then effectively the save rate going forward, we're about two-thirds. So we've got about 4,000-ish 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're being 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 '18 and '19 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 '18 and '19, we had 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 '18, '19, but maybe not at the rate of '18, '19 on individual years if elevated move 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 for us only if we had a much bigger footprint. But as you know, in the New York tristate area we benefited from many people leaving the city and moving to the outskirts, and that move churn is now effectively reversing. People are not necessarily at full capacity penetration; the empty homes in Long Island, Connecticut, or New Jersey that had been replacing city homes are coming back into the city. So it's not a share issue. We're just constrained to our footprint, and in the southern footprint in particular, when you move down to the next town over that may not be our area. So there's some rearranging. On a cumulative basis, if you take 72 plus 72 in 2018 and 2019, that's 144, and we did 142 in 2020. We're going to materially beat the average of 2018 and 2019 on housing activity, but I do think we've seen some reversal of the gains from last year, which will most likely bring down the 2018 and 2019 absolute numbers relative to 2021.

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

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, in terms of driving incremental subscriber growth relative to the company's historical case?

Yes, that's a great question. 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. 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 something we've seen across our peers as well, there is less gross add activity in general as people are not disconnecting on a non-pay basis and reconnecting with someone else. So gross adds, in general, I think, are down. But in terms of where our activity is, we're still seeing same amount activity in such things as 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 on a 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 are 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 of 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% in the first year that we see from edge-out new homes build, that's really going to benefit our 2022 numbers.

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

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?

Sure, Brett. 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 3 million homes passed while we compete with FiOS. Thereafter, we absolutely will look to do more. There are areas that are going to be prohibitively expensive. So it's not necessarily only in the Optimum footprint, but a lot of our edge-out new homes built are going to be done in fiber-to-the-home or we're going to be doing it in quasi fiber-to-the-home on a fiber-equivalent 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 our fiber work 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. In terms of edge outs, most of it is in terms of new homes built 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 attractive bundled services that we have. And so most of our new homes 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.

Next question is from John Hodulik from UBS.

Dexter, just a 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 do 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 down significantly in the first 6 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.

Next question is from James Ratcliffe.

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?

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, 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, I think we look at this in lots of different ways. Obviously, 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 deleveraging as well as EBITDA growth.

Next question is from Ben Swinburne from Morgan Stanley.

Two questions. First, on Altice Stream, Dexter, or Optimum Stream and Suddenlink Stream: can you talk a little more about that strategy and product plan? It's interesting — I know you have a lot of apps on the Altice One box, so why did it make sense to go with the streaming stick approach? Have you considered a broader marketing push beyond the 1-gig service? It's a product that's probably not too expensive for you, especially wholesale, so I'm curious whether you have thought about using it as a more aggressive marketing or bundling approach than what you've done so far. Second, I was curious about EBB. I don't think anyone's asked about the Emergency Broadband Benefit, and there were comments earlier in the quarter that it was not a major driver of net adds. Now that the quarter is in the books, do you have any comment on the size or benefit of EBB on net adds?

On the Stream side, Ben, the strategy is simple. 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 30% 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 low-cost. So when you're getting your Stream box for free and you're a 1P subscriber, that's an attractive product for a lot of people who are 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, being reactive also to what our consumers want and how our consumers are behaving today with most of their activity on the video side being OTT-based. And if you really look at what we spend and how easy to deploy the Stream box versus an Altice One box, it's a no-brainer. So there are boxes for one type of subscriber and then boxes for other types of subscribers that we think are going to help stickiness with our customers. On the 1-gig product, 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're 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've had about approvals of about 6,500 approvals. But of those 6,500 approvals, only about 300 to 400 are new customers. The rest are existing customers who have benefited from a subsidy.

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

Yes. Absolutely. Exactly.

Next question is from Kutgun Maral from RBC Capital Markets.

Great. 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 a 2023 and beyond event? And just lastly, I know you're 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 million to $400 million of annual fiber CapEx to roll off then?

A lot of questions. 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, more OpEx-related benefits, the penetration level is just still quite small right now. 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's going to be a positive effect. I don't think the numbers are large enough today for us to flag anything material, but it's probably something more of a 2023 effect, where you'll start seeing some meaningful effects. In addition to the fact that service-related visits as well as calls into the call center continued to reduce nicely, which we saw that in 2020, that is continuing into 2021. And with the continued investment in network and products, we expect those numbers to continue to fall. So there's a bunch of initiatives here that are affecting better service-related OpEx numbers.

Next question is from Jonathan Chaplin from New Street.

A couple of quick ones. We saw DISH secure an impressive MVNO deal with AT&T, Dexter, and I’m wondering if that is an opportunity for you to improve the MVNO you have with T‑Mobile right now by shopping it around. Another alternative I’ve thought about is finding a way to join the Comcast‑Charter MVNO, which also looks pretty compelling. Relatedly, can you give us a sense of the fixed cost base in mobile and what’s driving costs in that business at the moment? Should costs stay flat from here, and as you grow subscribers and revenue, are you growing against that cost? Apart from MVNO fees, are there other variable costs to consider? Also, there have been reports of uplink pressures in parts of your network, and I know some are looking at an upgrade to 1.2 gigahertz with a high split. Is that something you need to consider in parts of the network, or does the fiber deployment make it unnecessary so you can manage with existing equipment until fiber is everywhere?

On the MVNO, yes, absolutely, we continue to always monitor what else is going on in the market. T-Mobile has been a great partner. Very constructive on a whole host of issues with us, and so we like our partnership. 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 other parties on that. But we also are very happy currently with T-Mobile. On the cost base, there are really two variable factors. One is direct costs with our wholesale charges, and the second is marketing costs. And so we're keen to bring this business to EBITDA breakeven to positivity by the end of next year. We have said 70% of our gross adds are now taking a per-gig product which is a very nice margin positive product, and only 30% of our base is taking unlimited. 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 marketing. So as we see churn rates come down, customer service metrics 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 drive improvement. Do we put a push on marketing every now and then to drive volumes to accelerate that pace? That's something to consider. On upload speeds, we made some changes in certain parts of our footprint on upload speeds. Those upload speeds are new upload speeds that we're moving towards are on par or better than any of our peers at the same speed. We were an outlier in terms of our previous upload speeds. The changes were driven by some heavy usage by certain users who were consuming a lot of bandwidth. This will allow us to provide a much better uniformity of service across certain parts of our footprint. But to your point, this is really a short-term measure, 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 that is affecting some of our customers in terms of the services that they were seeing.

Next question is from Craig Moffett from MoffettNathanson.

Dexter, I wonder if you could just talk a little bit about broadband pricing. You talked about the competitive environment and promotionality 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?

I think we monitor our broadband pricing very closely. We are consistently usually $5 to $10 cheaper when you add in all the fees and modem-related fees. So that's really not where we're seeing 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 bundling is where we see pressure. When they come in aggressively on those fronts, those are obviously starting to look more attractive relative to what we have. So there are things we look at to counter that but if you look just purely on 1P broadband pricing today, they're not putting daily pressure on pure 1P pricing.

How much flexibility do you think you have to price differentially in areas where you're up against FiOS versus where you're not? I think from a regulatory perspective, that might be somewhat challenging sometimes.

We review pricing for less competitive areas regularly as we do for competitive areas. We want uniformity in our pricing, particularly geographically in states and in contiguous regions. But sometimes, we'll have differential pricing depending on where we are and there are reasons for that, maybe costs because in less dense areas our cost of servicing those areas are a lot higher. So there are a lot of factors that come into our pricing strategy, but clearly, regulatory is a factor that we are aware of as well as local environment and local competitive environment issues.

Next question is from Bryan Kraft from Deutsche Bank.

I wanted to ask a couple of questions on the Lightpath and advertising side. For Lightpath, can you talk about the opportunity 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 tough political comps, but much easier core comps?

On Lightpath, we have 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, over time, meaningful moves into new markets and get outsized returns on very small investments. These are 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 we are on the right path here to deliver much higher growth numbers at Lightpath. It's going to take a little bit of time. These acquisitions are small. In 2022, I'd be surprised if we saw a meaningful move in top line from new areas, but I suspect from 2023 onwards we will. So this is a good story to monitor. The numbers are small today, but they could get bigger. We like what the management team is doing. On News and Advertising, we're cautious about trying to manage expectations to anything more than the 2020 News and Advertising numbers because we have a $60 million political comparison difference between 2020 and 2021. So if we could do as well as 2020 and slightly better, that would be great. That would be a very, very good move. And then we go back into a political cycle in 2022. The things that Jon Steinberg and his team have been doing have been great. They've been able to, obviously, make Q2 a big quarter relative to last year because last year was a down quarter due to COVID. We're growing our business across all of our divisions and making up for a big loss of political revenue this year. So expectations are for us to be revenue flat to hopefully slightly up.

Next question is from Andrew Beale from Arete Research.

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 suburbs back to New York City. And the 7,000 nonpaid disconnects on regulatory storm. So I guess my question is, which parts of your franchise are you seeing the offsetting positive net adds this quarter against these multiple drags? And whether you can talk qualitatively about the Optimum FiOS overlap growth versus the non-overlap franchises and whether there's anything to say about Suddenlink growth ex-student seasonality or perhaps you've done something differently about the way those student contracts work?

I think 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 very elevated levels of move churn because of all the college towns that we have there. But we are seeing most of the disproportionate amount of move churn affecting the Optimum footprint. So that's really the key item there.

Right. And the positive offsetting the 0 net adds is coming mainly where?

We're seeing continued nice, elevated activities and growth coming from the Suddenlink footprint, so the gross add activity continues to bode very well, which is why we feel good about our edge-out strategy and our upgrade strategy at Suddenlink.

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

I was looking at the disclosures around broadband consumption for the broadband-only users. And it looks like it was down sequentially from last quarter at about 618 gigabytes to about 558. And I think on the 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 tiers and spending levels that they subscribe to with Altice?

I don't think we have a real read as to a 5% or 10% differential 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 left at home going forward and maybe a return to office type of levels. But the expectation is we're going to continue to see those usages rise. One of the other things to remember is that as the attachment rates on video continue to fall, we're seeing a lot more 1P users. So the sample size is growing a lot quicker than it has historically. And so those 1P usage patterns probably drag down the mean a bit more.

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.