Greetings, and welcome to the Altice USA Second Quarter 2022 Earnings Results Conference Call. Operator provided instructions. Please note that this conference is being recorded. I will now turn the conference over to our host, Nick Brown. Please go ahead.

Hello, everyone. Thanks for joining. Today, we are joined by Altice USA's CEO, Dexter Goei; and 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 Slide 2. Dexter, over to you.

Hello, everyone. Kicking off with a summary of our second quarter performance on Slide 3. Revenue declined 2.1% year-over-year, mainly driven by our Residential business. Residential broadband customer net losses were 40,000 for Q2, with similar market dynamics to what we've seen in the last few quarters but with some incremental pressure coming from normal seasonality, which we have not seen in a couple of years due to the pandemic. Q2 adjusted EBITDA declined 8.8% year-over-year with a margin of 40.9%, reflecting both the revenue decline and higher operating expenses to drive future growth. Free cash flow remains robust, generating $191 million in Q2 and about $400 million year-to-date, even with elevated levels of investment to accelerate our fiber rollout and new build activity. Our Optimum fiber network deployment has meaningfully accelerated, rolling out at a faster pace than we've ever achieved with as many incremental fiber passings added in Q2 as the entire prior year of 2021. At 1.6 million total fiber passings, we are very much back on track with our long-term fiber build plan. In the quarter, we surpassed 100,000 fiber customers and expect to continue to grow at an accelerated pace. With the launch of multi-gig speeds, we are now positioned as the fastest fiber broadband provider in the New York Tri-state area. Our Optimum Mobile business also saw a significant acceleration in subscriber growth, reaching more than 200,000 lines with attractive promotional offerings for Optimum broadband customers. Lastly, we've rebranded Suddenlink to Optimum, unifying telecommunications brands under one powerful national Optimum brand which will ensure consistency and simplification in all of our marketing offers and experience. We continue to rapidly expand our sales distribution channels, including the opening of several more Optimum stores across the country. We have begun to see the benefits of our reinvestment strategy, and we're extremely focused on executing on all of our key growth initiatives, which we expect to improve our overall customer growth going forward. Slide 4 shows our revenue trends in more detail. Total reported revenue in Q2 declined 2.1% year-over-year, mainly due to the trends in our Residential business, which declined 3%. Total revenue was down 1.9%, excluding about $5 million of prior year air strand revenue. To remind you, our backhaul contract with T-Mobile was terminated at the end of last year. This is resulting in a loss of about $120 million of air strand revenue this year when comparing to 2021 with about $110 million of this in the second half of the year coming out of our Business Services division, including $75 million in Q3. Business Services revenue in Q2 was flat, down 1.1% year-over-year on a reported basis but grew 1.3%, excluding this air strand revenue. Last, News and Advertising grew 1.1% in Q2 as trends here are normalizing. Turning to Slide 5 and Q2 customer trends in our Residential business. We reported a net loss of 48,000 residential customer relationships and a broadband net loss of 40,000. Recall the second quarter is normally seasonally weaker for Suddenlink because of its exposure to university towns. The difference in Q1 and Q2 this year of about 26,000 broadband customers is exactly in line with our four-year average variation between these two quarters prior to the pandemic across 2016 to 2019. In other words, the underlying performance of the business suggests we are yet to see a full benefit and pickup from our growth investments, but we are confident this will come as we remain full steam ahead on our various initiatives. We also continue to see lower levels of market activity and gross additions across our footprint, which we don't think is unique to us. Clearly, fixed wireless access is taking some of the growth and switchers out of the market in the past couple of quarters with more aggressive promotions, and there is some incremental pressure from fiber overbuilders. Although visibility remains lower than normal, we are still confident that we will return to broadband customer growth with our accelerated fiber rollout, multi-gig services and new build activity, complemented by more attractive mobile bundles, expanded sales distribution channels and improved customer service. Slide 6 is a recap of our longer-term fiber targets where we are still on track to bring 100% fiber broadband, delivering multi-gig speeds to more than two-thirds of our entire footprint over the next four years, targeting a total of 6.5 million fibers of home passings by the end of 2025. Given our more reliable fiber network service, we expect to drive higher gross additions and reduce churn as well as reduce longer-term maintenance and technical service costs. When comparing the experience of broadband customers on our fiber network to that of customers on our HFC network, we are now seeing 80% NPS improvements, 10% higher ARPUs and five to six percentage points of annualized churn benefits. And we're still seeing these customer metrics improve every quarter, which is evidence of our fiber strategy really paying off. In June, Optimum introduced symmetrical 2-gig and 5-gig fiber Internet speed tiers for the first time, making us the fastest residential fiber Internet service provider in the New York Tri-state area. We started by offering these multi-gig tiers in select areas of Long Island, and we will progressively roll them out across the company's entire Tri-state fiber footprint by year-end. The fiber network we're building is also very scalable as we've demonstrated with this multi-gig deployment, and we'll continue to allow much faster upgrades in the future to enable more capacity and higher broadband speeds. Slide 7 is a current snapshot of the progress with our fiber build and customer trends. You can see in the first row that we released an incremental 270,000 fiber passings during Q2, reaching approximately 1.6 million total passings, mainly in our Optimum footprint. To emphasize, this is as many new fiber passings in one quarter as we rolled out in the entire prior year, showing that our construction team is now really hitting its stride without the same types of permitting and COVID constraints that we've had over the past couple of years. We expect incremental growth on fiber passings to remain at elevated levels in Q3, following our increased investments since spring and summer months are more conducive to construction and deployment with better weather. You can also see that our quarterly fiber customer net additions also accelerated to 23,000 in Q2, which is about double our prior quarterly run rate, as we've done more proactive migrations and marketed the product more aggressively. We have reached 6.6% fiber customer penetration of our total FTTH passings with 104,000 fiber customers at the end of June. Note, our total customer penetration, including both our fiber and cable customers, is over 50% in these areas where we have fiber coverage, so we're reinforcing our incumbent position with our fiber upgrades here. On Slide 8, you can see we've added also 58,000 new build passings in Q2 and 100,000 year-to-date, putting us well on track to add approximately 175,000 passings organically this year. We are mostly edging out around the Suddenlink footprint, and about one-third of our total new build activity this year will be new fiber homes. We are consistently achieving over 40% penetration after the first year of expanding our network into new areas which is correlated to new customer growth. To update our broadband subsidy applications program, we received awards of 24,000 homes year-to-date, totaling $35 million of subsidy grants. In Q2, we were awarded the grants for 9,000 homes in Louisiana and 7,000 homes in Arizona, in addition to the 8,000 homes we were awarded in Arizona in Q1. We will be deploying FTTH in all the areas where we receive grants. We are very excited about the public grant co-funding as this is an opportunity to deliver rapid fiber coverage to unserved and underserved areas, and we're very focused on continuing to be the trusted partner for local governments to help bridge the digital divide. Slide 9 demonstrates the long runway we have to sell fiber broadband services that can support very high levels of data usage. The average download speeds customers take across our total base was just under 400 megabits per second as of Q2, but our fiber customers are taking twice these speeds on average. Our 1-gig customer penetration increased 18% in Q2, and this continues to grow every quarter. Around 45% of our customer base take speeds of 200 megabits per second or lower, so we still have a huge opportunity to keep driving customers to higher speeds, especially as we market multi-gig speeds on our fiber network more broadly. Average monthly data usage for broadband-only customers was 578 gigabytes in Q2 with video streaming still the biggest driver. For our highest data-driving customers, about 15% of our base of broadband-only customers are using more than 1 terabyte of data per month. More than one-quarter of our fiber customers are using more than 1 terabyte of data each month. There is no better technology than fiber to support this sort of structural growth trend. Slide 10 provides an update on our Optimum Mobile business where we have reached 231,000 customers as of the end of Q2, representing 5.1% penetration of our Residential customer base. Recall, we launched more competitive Internet plus mobile converged offerings in January. And in March, we announced an expanded MVNO agreement with T-Mobile, allowing us to offer more attractive mobile promotions, including extremely competitive multiline discounts, which we've summarized on the right-hand side of the slide. We're pleased to be recognized for our excellence in customer satisfaction being ranked number one amongst full-service wireless providers by ACSI (American Customer Satisfaction Index) recently. Our aggressive 1-gigabyte mobile promotion again drove the majority of the additional customer growth for the quarter. Even though we've updated this offer to $5 per month, we believe we can maintain a higher level of underlying mobile customer growth going forward and expect this will help provide an improved broadband customer churn as well. Slide 11 shows some of the highlights of the rebrand of Suddenlink to Optimum to unify our marketing efforts and create a consistent customer and employee experience, which kicked off in earnest this week. I want to thank all the teams at Altice USA for their tremendous work over the last few months preparing for the rebrand and generating tremendous excitement across the company for this huge milestone. Additionally, we continue to expand our sales distribution channels to support improved customer growth. We've already reached the lower end of our year-end target for door-to-door sales headcount, and a number of new retail locations is due to ramp up into the end of the year as we've executed on almost all of the required leases at this point. Turning to Slide 12 on Business Services. Revenue growth of 1.3% in Q2, excluding air strand revenue, is in line with Q1 but below last year's level of growth as the year-on-year comparisons are normalizing after the peak negative impact we saw from the pandemic in 2020. We continue to see positive customer trends, but we're not back yet to the activity levels in the SMB space that we saw prior to the pandemic. And we're mindful that the economic backdrop today may delay a more material pickup in growth here. SMB and other revenue grew 1.8%, ex air strand, in Q2, and Lightpath revenue was flat. However, net sales bookings at Lightpath increased significantly again in Q2, up 63% year-over-year, benefiting from our recent network expansions, new market launches and expanded sales force. We anticipate that this should also contribute to accelerated revenue growth in the coming quarters. Slide 13 is a summary of our News and Advertising business performance. Revenue grew 1.1% in Q2 with year-over-year comparisons normalizing here as well. The auto sector remains weak, although we're starting to see some green shoots of recovery. Remember, we expect some more political benefit this year in the second half given the midterm elections but didn't see much of a pickup from this yet in Q2. And now I'll hand it over to Mike to review the financials in more detail.

Thank you, Dexter, and good afternoon, everybody. I'm turning now to Slide 15 with a summary of our financials for the quarter. Our revenue declined 2.1% in Q2 with adjusted EBITDA declining 8.8% with similar performance year-to-date. Our adjusted EBITDA margin was 40.9% in Q2, which is three percentage points below the prior year quarter, reflecting higher operating costs to invest in some of the areas we've outlined to drive better customer growth and higher medium- to long-term revenue and cash flow growth. For example, as Dexter pointed out, we have now reached over 400 door-to-door salespeople and over 100 retail stores, and we are continuing to put marketing dollars behind our recent mobile converged offers and our rebrand campaign. Our cash capital expenditures were up 50% year-over-year driven by increased fiber investment. This all contributed to a 33.2% reduction in our EBITDA less CapEx or operating free cash flow. On Slide 16, you can see our capital intensity was 19.7% in Q2, up from 12.8% in the prior year quarter. Without fiber and new home build growth investment, capital intensity would have been 9.1%. Our CapEx target in 2022 remains between $1.7 billion to $1.8 billion on a cash basis, including $300 million to $400 million of additional FTTH CapEx and $100 million to $200 million of additional new build CapEx compared to the prior year. Remember that after a couple of years of elevated CapEx to support our accelerated fiber rollout, we expect to start seeing significantly reduced CapEx after 2024 once we start scaling back that build. Slide 17 highlights the components of free cash flow in Q2, totaling $191 million for the quarter and about $400 million year-to-date, which is lower year-over-year given all of our accelerated growth investments. Our cash interest was $253 million in Q2, which should be slightly higher in Q3 and Q4 given recent rate increases. Cash taxes were elevated at $150 million in Q2, but we currently expect payments to be significantly lower in the second half when compared to the first half of the year. And lastly, other financing activity reflects continued debt paydown amounting to about $85 million for the quarter using excess free cash flow. Finally, on Slide 18, we want to reiterate that we have a very well-termed-out debt maturity profile following prior refinancing activity. 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 CSC Holdings revolving credit facility. For example, we can easily cover the upcoming $650 million note maturing in September in this manner without any need to access the credit markets. Last month, we entered into an amendment to our main CSC Holdings revolving credit facility, extending the maturity on an aggregate amount of $2.3 billion of our total revolver commitments to July 2027 at a rate equal to SOFR plus 2.35% per annum. At the end of Q2, we had liquidity of approximately $2 billion on top of maintaining a healthy level of free cash flow generation. The weighted average life of our debt is currently 5.9 years, and our weighted average cost of debt is 4.9%. And as we demonstrated again with our recent revolving credit facility refinancing, we will continue to proactively and opportunistically manage our liabilities. And with that, we will now take any questions.

Our first question comes from Philip Cusick with JPMorgan.

Two, if I can. First, Dexter, in the past, you've talked about a potential return to growth at some point this year on broadband subs. Is that still valid? And if not, then what has to happen to get there? And then second, there's a lot of chatter in the market about a sale of assets. Can you give us an idea of where you might be in that process and what the next steps are?

Thanks, Phil. On the first one, yes, we're doing all the right things strategically and operationally to invest back in the growth of our business. We are confident that we will come back to growth. The question is when. We have been expecting to see that in the second half of this year. I still think that we can see it in the second half of this year, but we can't give you an indication as to precisely when as of now. But we continue to see good improvements from an operational standpoint that we expect to bear fruit into positive net adds in the second half of this year, hopefully. On the sale of assets, there has been a lot of chatter out there. We can confirm there is a process going on. We don't want to comment any further than that. Much like what we did when there was chatter on Lightpath, we'll update you and the rest of the market when we deem it appropriate to update. At this time, there's nothing more to really talk about.

Our next question comes from Jonathan Chaplin with New Street.

Dexter, just following up on that question from Phil. Can you give us a sense of the number of subscribers at Suddenlink versus Optimum and the breakdown of EBITDA between Suddenlink and Optimum?

Yes, Jonathan, we're going to sidetrack that a little bit. We're not in a position to talk about the assets in detail. We can confirm that we've received a lot of reverse inquiry for all or parts of the Suddenlink assets. We don't want to get into a debate as to financial and operational KPIs in a public forum. But numbers have been out there historically on the asset, so you could probably, with other analysts, figure out, broadly speaking, what the numbers look like.

Our next question comes from Brett Feldman with Goldman Sachs.

From some of your peers across telecom and cable, we heard discussions around inflationary cost pressures, in some cases, a normalization of bad debt. Some of them are seeing longer collection times. I was just wondering, can you give us an update to what extent at all are some of these macro pressures reflected in your trends this quarter? Or what's your outlook for that?

From an inflationary pressure standpoint, some of the obvious things, like utilities numbers, can be quantified. We did see pressure on labor in the early part of this year. There's probably less pressure on the labor side today, which is indicative in terms of some of our success in driving some of our distribution channel investments ahead of schedule. Overall, from an execution standpoint, our operating costs aren't meaningfully being impacted by inflationary pressures. The utility number year-to-date is maybe costing us an extra $10 million of utility costs today. There is pressure in supply chains, as everyone talks about, whether it be CPEs or fiber itself. We feel good about where we are from a supply chain standpoint given that we've been at it for a couple of years on fiber. We clearly are going to run into, I'm sure, instances where we wish we had more in the supply chain than we have, but none of it is impacting our 2022 capital investment strategy in terms of being able to deploy and deliver what we expect to. Brett, you asked something else other than utilities, didn't you?

Bad debt expense, collection timelines, stuff like that.

Sure, Brett. We're seeing a little bit of deterioration in that space, not a lot. I would point out this is a deterioration versus the prior year when bad debt expense and nonpay write-offs were at historical all-time lows. We've always ranked pretty well among our peers in terms of bad debt as a percentage of revenue, and that continues. So mild pressure but nothing of note.

So is this getting back to what you saw pre-pandemic? Or is it trending a little worse?

No. I would say it's somewhere between pre-pandemic and the all-time lows we saw last year. I don't think we're back to pre-pandemic levels.

Our next question comes from Craig Moffett with MoffettNathanson.

Yes. I'd like to talk about wireless a little bit. It looks like your numbers in wireless are at least starting to look a little bit more like others in the industry, but it represents 1% of your revenues versus close to 6% at Charter. Can you talk about what you're seeing with wireless now that you seem to finally have the product that you wanted to sell all along and what impact it has on the rest of your business? Are you seeing churn reductions? Are you seeing pull-through in broadband and that sort of thing?

It's a good question. One, we're focused on getting a good product, and our partners at T-Mobile have been helpful on that. Since the beginning of the year, we've had a good product out there. Second was to get an offer product and a marketing campaign that made sense. We've been working at that for the last couple of quarters, and we're starting to see some fruition here, particularly on the distribution side of our business being able to push more channels on the mobile side. We continue to believe it's a good churn enhancer. There's not a lot of material data yet given the inflection points on the acceleration of our mobile this year. We're not into those churn reduction statistics in terms of time frames yet, so we'll have a better view on the cohorts next year. We don't anticipate seeing anything different than what we see from our peers in terms of impacts on churn and pull-through characteristics. We are attracting some of the lower-pay tiers with the 1-gig and the 3-gig or the 5-gig product, depending on timing. We're seeing about one-third of our mobile mix is on the unlimited side, so very similar statistics to what we hear from our cable peers. We can give you a little more detail on financial impact and customer impact in a couple of quarters as we look at these cohorts.

Our next question comes from Kutgun Maral with RBC Capital Markets.

Great. I wanted to follow up on the asset monetization discussion. We typically talk about legacy Suddenlink, but I was hoping to get your perspectives on the strategic value of legacy Optimum, given that it's the top DMA and is much further along and fiber built. And if I could just circle back to the broadband trends. You noted the Q1 to Q2 trend this year was consistent with the average seasonality you saw pre-pandemic. I know there's limited visibility at the moment. But just to level set how to think about next quarter, I think the historical average seasonal benefit heading into Q3 has been about 4,000 or so. Is that the right way to think about your near-term expectations?

On asset monetization, we've gotten a lot of inquiry around the Suddenlink assets, which is why we're engaging and being responsive. It shouldn't escape the fact that we were embarking on our Suddenlink upgrade over the next year and thereafter, which is a good time for us to pause here and look for potentially significantly accretive transactions for shareholders before we embark on a big upgrade. So it's the right time for us to be looking at this given where we are in our capital deployment time frame. To your point, Optimum is going to be pretty fully fiberized by the end of 2024. We believe that's going to be a very strategic asset going forward given its DMA. But we are not engaged in a discussion around that today, and we'll have that discussion in future years if relevant; that is not on the table today. You are thinking about it right in terms of what a potential RemainCo would look like to the extent that we do something with the Suddenlink assets. On seasonality, we are not in the business of commenting intra-quarter that way. The statistic you cited on Q2 to Q3 has some variation; we've seen numbers all over the place going from Q2 to Q3 when we reviewed three or four years pre-pandemic. I don't want to preface what we're seeing in Q3, particularly given that July is seasonally typically the worst or the second-worst month of the year, but then we tend to have the best months being August and September. We're at the beginning of August, and we'll talk about this in our next quarter earnings.

And next question comes from James Ratcliffe with Evercore ISI.

I have two, if I could. First, you talked broadband trends, about seeing lower gross add activity. Can you just give us a sense of how you feel your share of those gross adds are trending and particularly any difference in areas where you're marketing the fiber product versus where you don't have it? And secondly, can you talk a little bit about scale and how much that matters at this point in the cable industry? Historically there was a big advantage to absolute scale in terms of programming negotiation leverage. Is that still a big deal?

It's interesting. On the overall landscape, we see lower activity on the gross add side in the historic Cablevision footprint in the East, but we still continue to see very robust gross add activity in the Suddenlink footprint. Where we see churn differential is we see churn in the East being very stable but in the West being a lot higher because of competitive pressures. So we see two different topographies in terms of our footprint. In terms of jump balls, we think we're performing well. We have very competitive products relative to Fios, which is the key peer for us in the East. We see ourselves as a better economic proposition relative to Fios if you look at the bundles, and clearly, in our fiber footprint, which today is 1.6 million homes growing to anywhere from 2.3 million plus by the end of this year in the East, we will be a differentiating factor in those jump balls. In the West, we don't have the fiber product, and we are seeing competitive pressures from fiber overbuilders in certain parts of our market. And even though we can't put our finger on it specifically on the churn activity relating to fixed wireless access, we're certain FWA is impacting, in particular, our Suddenlink footprint. Does scale matter? It does because of two things. One, programming costs are key; and secondly, relative to marketing and distribution efforts, it's key. We see that in the Suddenlink footprint where it's difficult to harmonize and centralize marketing and distribution efforts when you're in many disparate smaller communities. So scale matters for efficiencies in marketing and distribution and programming costs.

Our next question comes from Peter Supino with Wolfe Research.

I have a question about trends in Suddenlink and another about fiber. On Suddenlink, I'm curious if you could comment on changes competitively that might be resulting from churn or just the size of the gross add pool. I heard your comment about the impact of fixed wireless and possibly on churn, and I've heard other operators say that churn is stable. So wondering how churn and gross adds are trending in Suddenlink. And then on fiber, I'm wondering how your cost per home passed is trending and whether it includes CapEx for the drop and the install.

To reiterate, we see two different trends. We don't see lower activity from a gross add standpoint in our Suddenlink footprint. It's marginally different, maybe a few thousand, so it's negligible in terms of absolute numbers relative to last year on gross adds. But we do see an uptick in churn due to the competitive environment, whether it be FWA or fiber overbuilders. We can isolate the markets where we see fiber overbuilders and tell you we have incremental churn that likely leads to a majority of the impact we're seeing in Suddenlink on a quarterly basis. The impact of FWA we can't pinpoint exactly which markets because most of our Suddenlink markets are exposed to FWA. But we do see similar gross add activity and higher churn, so some of it must be coming from those competitive pressures. In our more urban Optimum areas, gross add activity is lower, but churn is very stable. Exposure to FWA in our urban areas is lower than in Suddenlink. On cost per home passed, in the East we've been public around that $500 to $550 number as an average cost. Sometimes it's more expensive, sometimes a lot less expensive. It depends on whether it's MDUs, aerial, or whether there's significant engineering work. That average cost does not include the drop and does not include CPE costs. That cost is the passing but not the installation process.

Our next question comes from Kutgun Maral with RBC Capital Markets.

Great. I wanted to follow up on the asset monetization discussion. We typically talk about legacy Suddenlink, but I was hoping to get your perspectives on the strategic value of legacy Optimum, just given that it's the top DMA and is much further along, and it's fiber built. And if I could just circle back to the broadband trends. You noted that the Q1 to Q2 trend this year was consistent with the average seasonality you saw pre-pandemic. I know there's limited visibility at the moment. But just to level set maybe how to think about next quarter, I think the historical average seasonal benefit heading into Q3 has been about 4,000 or so. So sorry to get a bit too specific, but is that the right way to think about your near-term expectations?

And our next question comes from James Ratcliffe with Evercore ISI. Our next question comes from Frank Louthan with Raymond James.

It's Rob on for Frank. So you might have spoken to this a bit earlier, but was the Suddenlink rebrand originally slated for early August? Or was that accelerated? And if it was accelerated, can you talk about what drove that acceleration?

Yes. It was always slated for early August. Rebrands require a lot of planning and coordination, and this has been methodically put in place for the last nine months in terms of pacing, investments and market readiness across distribution and media criteria, and all the operational pieces from uniforms to trucks to labeling of equipment. People have asked why we're doing a rebrand if we are engaging in strategic discussions; the strategic discussions may amount to nothing, and we'll continue to run the business as usual until we don't have to. We need to continue to execute on what we planned from a budgetary and strategic standpoint earlier in the year and what we announced at the end of last year. We'll continue to do that until we have something else to talk about relative to the Suddenlink asset.

Next question comes from Steven Cahall with Wells Fargo.

So just wondering if the reduction in gross adds and net adds that you and others are seeing causes you to revise the way you think about your penetration assumptions, either for the fiber rollout or the new build activity? I'm just trying to figure out if the growth slowdown is market-wide and sort of regardless of technology that's going to market or if it really is very specific to technologies, and so fiber and things like fiber can continue to have that same penetration pattern that you've historically seen. And then just as a quick follow-up, wondering what mobile CapEx is baked into the current guidance? Is that something you think will kind of be steady over time or up or down?

On the fiber side, we continue to believe that, pound for pound, fiber versus any other technology is going to be the majority winner of market share going forward. We see that in early stats and in other markets. The only differences are return characteristics for some smaller fiber operators have changed recently due to competitive pressures, inflationary pressures on operating costs, or supply chain and execution issues. We feel good about where we are in the fiber rollout because in scale you're able to mitigate many of those issues, particularly with cash flows being generated from the HFC product as well. We continue to feel confident about the penetration numbers we expect and the return on investment we'll deliver. On mobile CapEx, there is no mobile CapEx baked into current guidance.

Our next question comes from Ben Swinburne with Morgan Stanley.

Dexter, you made a couple of comments earlier about accelerating the pace of fiber. I wanted to come back to that. Can you just talk about your expectations for both the second half of the year? Are you still expecting to hit that 2.5 million number by the end of the year and sort of the organization's ability to continue to ramp that given all the red tape involved and construction, et cetera? And linking to the installation side, it sounded like you expect fiber net adds to accelerate in the second half from the second quarter level. Can you flesh that out a little bit? And then I had a quick follow-up on the mobile front.

Our budgetary process last year targeted about 1 million homes passed in fiber, roughly 900,000 in the East and 100,000 across the West. We're trying to reforecast that to 1.2 million to 1.3 million this year. We will clearly beat 1 million homes and suspect we'll get to 1.2 million; whether we reach 1.3 million remains to be seen. We're on pace and accelerating because quicker deployment benefits us in getting new customers onboard, migrating customers, reducing cost to serve, and getting ahead of potential inflationary pressures. State governments like New York and New Jersey have been very helpful on permitting over the last six months, allowing us to release big swaths of areas, particularly in New York. July has been a great month, and we expect Q3 to be materially better than Q2 in terms of delivery of homes passed. We monitor progress closely on a near-daily basis. From an organizational standpoint, we are set up to ramp. We've put resources in place to prioritize both gross adds and migrations. The gross add side has been great; migrations have had more IT-related teething issues, but we are accelerating migrations and expect to continue accelerating to year-end. I would like to get as close to 200,000 fiber subscribers as possible this year and then materially move that number in 2023.

Got it. And then just on wireless. You guys have gotten more aggressive in the marketplace and that's translating nicely into volume growth. How are you thinking about using wireless to drive broadband versus generating meaningful EBITDA out of the wireless business? I don't know how much you can tell us about unit economics or what kind of service ARPUs you expect in that business over the next couple of quarters and years. What's your philosophy on using mobile in the marketplace?

We're seeing peers use fixed to drive mobile, and cable operators use mobile to drive fixed. We want to keep discipline on economics and avoid selling negative gross margin products. We look at customer gross margin rather than product gross margin. If we can grow gross margin per customer and total customers, that's the objective. Mobile promotions are used tactically—like a promotional subscription or gift—to help drive customer economics over time. Overall, we're focused on growing gross margin per customer.

Our next question comes from Bryan Kraft with Deutsche Bank.

I had two, if you don't mind. First, once you work through the reramp in your sales channels as we get into next year, what's the right way to think about broadband ARPU growth in 2023 and beyond? Do you see it returning to mid-single-digit range? Or do you think that's too aggressive given the competitive environment? And then I also wanted to ask about Lightpath. You mentioned that Lightpath's net sales bookings increased by 63%. Can you help us contextualize that in terms of how much we could expect growth in Lightpath to accelerate?

On ARPU, given heavy promotions last year and those this year, we've seen broadband ARPU continue to grow but not at mid-single-digits; it's low single-digit growth. We're confident we can continue to push broadband ARPU, but in the near term low single-digit growth is the right expectation given promotions and mix until churn reductions from fiber become material. On Lightpath, order entries take six to twelve months to execute and turn to revenue. Revenue growth today is flat, but if we install the increased bookings over the next six to twelve months, you should look towards mid-single-digit growth for Lightpath.

Our next question comes from Doug Mitchell with Credit Suisse.

Two questions. First, I wanted to clarify the comment on over 50% penetration where you have both fiber and coax. I'm trying to understand: are those penetrations grown since you've launched fiber? Or were you already over 50% and you think you can defend that number? Second, private market values for cable must be quite enticing for you to start a process on asset sales and cable valuations are long-term lows. Do you have any perspective, from talking with potential buyers, as to what explains the gap between public and private valuations for cable assets? It seems about as wide as I've ever seen it.

On the first point, our penetration percentages in the areas where we've launched fiber are over 50% already. We're confident we can maintain those market shares. We're competing against fiber today, primarily Verizon Fios, but the Fios technology is meaningfully today inferior to XGS-PON. It will take Verizon many years and significant investment to catch up in terms of speeds and experience. Once we reach critical mass, perfect installation processes and migrations, we believe we can gain market share back in the Optimum footprint. On private market multiples, there are reasons private market multiples can be higher: strategic synergies, ability to lever assets in a private context at higher levels, lower cost of capital for some private funds, and more patient capital. That is driving continued interest from the private market and higher implied valuations, which is why we are being reactive to inbound interest because there could be very accretive transactions for shareholders.

Our next question comes from Matthew Harrigan with Benchmark.

Dexter, you've been pretty adamant in talking about your commitment to the New York metro market and the value there. How much of that stems from a perspective that in the long term your fiber on the consumer side will enable many more apps and revenue opportunities, effectively getting revenues up much higher? There's been a lot of tactical sparring with Verizon. It feels like you're in a good position right now, but what makes you very committed to New York versus, say, the Suddenlink markets?

You've hit it on the nose. We have a strong competitor in Verizon in a two-player market and that competitive dynamic is attractive. The demographics and population economics in New York are attractive. Having a fully fiberized asset in the largest and wealthiest DMA gives strategic value. We're already advanced in our fiber rollout in the Optimum footprint, know how to execute, and have clarity on the cost to execute. There are no surprises over the next couple of years, and then we're done; the free cash flow dynamics are impressive on top of it being a very strategic asset.

There are no further questions at this time. I'll turn it back to management for any closing remarks.

Thank you for joining. Do let us know if you'd like to follow up with us on any questions. Otherwise, we'll speak to you in the coming weeks. Thank you.

Thank you. This concludes today's call. All parties may disconnect. Have a good evening.