Altice USA, Inc. (NYSE:ATUS) Q4 2023 Earnings Conference Call February 14, 2024 4:30 PM ET
Company Participants
Sarah Freedman – Investor Relations
Dennis Mathew – Chairman and Chief Executive Officer
Marc Sirota – Chief Financial Officer
Conference Call Participants
Michael Rollins – Citi
Ben Swinburne – Morgan Stanley
Kutgun Maral – Evercore ISI
John Hodulik – UBS
Jessica Reif Ehrlich – Bank of America
Craig Moffett – MoffettNathanson
Vikash Harlalka – New Street Research
Bryan Kraft – Deutsche Bank
Operator
Hello, and welcome to the Altice USA Q4 and Full Year 2023 Earnings Results Conference Call and Webcast. [Operator Instructions] A questions-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
It’s now my pleasure to turn the call over to Sarah Freedman, Investor Relations. Please go ahead, Sarah.
Sarah Freedman
Hello, and welcome to the Altice USA Q4 and Full Year 2023 Earnings Call. We are joined today by Altice USA’s Chairman and CEO, Dennis Mathew; and CFO, Marc Sirota, who together will take you through the presentation and then be available for questions.
As today’s presentation may contain forward-looking statements, please carefully review the section titled Forward-Looking Statements on Slide 2.
Dennis, please go ahead.
Dennis Mathew
Thank you, Sarah. I’m pleased to be here with all of you to review our Q4 and full year performance. Before we start, I want to express my gratitude to our dedicated teams and their families.
In 2023, Optimum began a transformative journey marked by the introduction of a new mission and strategic priorities to deliver improved customer and employee experiences. It’s only because of their dedication and support that we were able to deliver on the commitments we set forth. We did what we said we were going to do and it took everyone to do it.
I remind you that in the beginning of the year, we established our new Optimum mission to be the connectivity provider of choice in every community that we serve. And we introduced the four strategic priorities that would position us to return to sustainable customer, revenue and cash flow growth. They are to delight with the best customer experience, grow with the best customer relationships, connect with the best networks and inspire with the best people.
Throughout this year, we took steps to lay the foundation against these pillars. And while we are in the very early innings of our turnaround, I’m incredibly proud that we achieved our full-year objectives and began transforming every area of the business which has set the stage for 2024.
Let’s review some of the achievements beginning on Slide 3. Priority number one was to transform the culture and we did just that. We brought in amazing talent to complement our teams and to lead through operational, financial and cultural transformation. The successful integration of a new CFO and a new telecoms executive leadership team, including more than 100 new leaders across our organization, has equipped Optimum with a best-in-class team with decades of global and U.S. broadband, mobile and video experience.
We introduced a regional operating and leadership model with a localized go-to-market approach paving the way for a hyper local presence in the communities we serve. And we drove employee engagement by listening and acting, so all of our employees are empowered to represent Optimum at its best.
Second, we acted with financial discipline. We changed how our finance organization works with our operational teams, embedding a culture to help drive the business and make smarter decisions. And as a result, we have seen stabilization in our adjusted EBITDA margins with full-year 2023 EBITDA margin of 39.1%. We drove capital intensity down throughout the year from the recent peak in Q1 of over 25% down to under 13% in Q4 of 2023.
We committed to being positive free cash flow in the full-year and delivered $122 million of free cash flow through improved topline, EBITDA and CapEx trends in the back half of this year. We were proactive in our debt maturity management, clearing out the 2024, 2025 and 2026 maturities giving us one way to focus on operating the business with no maturities until 2027. And we managed our operations and financial profile with a focus on our core growth businesses. As evidenced by the recent sale of Cheddar News, we will continue to strategically evaluate our operations to maximize our focus on the core business, positioning ourselves for sustained growth and success.
Next, we introduced an improved base management strategy that will enable us to profitably evolve the price value equation for our base. Specifically, you saw a few weeks ago, we announced changes to our fiber and HFC rack rates for everyday pricing and began rightsizing speeds for customers as part of our efforts to simplify and normalized pricing and packaging. We also introduced artificial intelligence and machine learning capabilities, leveraging customer lifetime value models to advance our frontline’s ability to more effectively manage our base. Looking ahead, we will continue to take a disciplined approach to profitability while ensuring we offer the best value for each customer so we can reduce churn and grow ARPU over the long-term.
On the customer front, I’m pleased that we meaningfully accelerated mobile and fiber growth. We set a new mobile strategy this year that enabled mobile line net additions of 34,000 lines in the fourth quarter, an acceleration of more than eight times in our pace of mobile growth compared to Q4 of the prior year. We also sustained improvements in fiber penetration now reaching over 12% at the end of 2023. The growth in both mobile and fiber are supported by our sales optimization efforts, driven by a new winning sales culture, stronger channel performance, a clear retail strategy, improved compensation models, disciplined performance management and attractive clear offers like Optimum Complete.
And finally, we made significant improvements in the customer experience, advancing CX as our best product at Optimum. We prioritize delivering top tier network quality and providing exceptional experiences for our customers, precisely when they depend on us the most, be it for school, work, healthcare or family moments. This year, we also launched 8-gig symmetrical speeds on our fiber network to more than 2.7 million customers, making us the nation’s largest 8-gig provider. This continues to be a strong competitive advantage everywhere we overlap with a fiber competitor in the Northeast.
We successfully implemented new self-service tools such as the My Optimum app and we advanced other self-service options like chat and a more customer friendly portal. We also placed greater emphasis on self-installed and we’ve seen the number of self-installations nearly double in the full-year 2023 compared to the prior year. Everything we have improved in terms of quality products, quality network, quality service and quality team is translating into better NPS. Furthermore, it’s resulting in significantly fewer service calls and truck rolls, which are leading indicators of improved performance, giving us confidence that our strategy is working and we will return to broadband customer growth over time.
In summary, 2023 was about people, strategy and process. I’m pleased that we have vastly more capabilities, more operational rigor, more tools and more execution discipline to be able to drive a more effective go-to-market strategy, deliver high quality experiences, enhance our base management and stabilize our business. With all of this in place, we have strong levers to pull in 2024 as we pave the way to return to long-term sustainable growth.
Let’s turn to Slide 4 to review them. First, we will continue to evolve our connectivity portfolio and value proposition to meet changing customer demands, while driving improved ARPU trends across our residential and business division. Broadband and mobile remain our anchor products supported by an attractive bundle offer with Optimum Complete. As we move through 2024, we will better leverage assets like fiber as we sell in gig and multi-gig speeds combined with mobile to give customers the best connectivity experience for the best value.
On the video side, in 2023, we launched Optimum Stream as our main video product, which blends a streaming experience with a linear video viewing experience through the Optimum TV app. We will continue to carefully evaluate how we go to market with our video product to maximize both customer experience and profitability and have plans to launch new video package options later this year giving our customers greater flexibility and choice.
With respect to our business services segment, I previously mentioned that we have significant potential on the horizon. In Q4, we saw B2B revenue grow 1% year-over-year. We launched Optimum Mobile for SMB last month and we will continue to expand the B2B portfolio over the year, which will give us additional runway to support ARPU expansion in our B2B segment. We are confident we will continue to see improvement with additional products and a new dedicated team led by our President of Business Services, Mike Parker, who joined the organization in December.
As we continue to evolve our operational approach, we are working in parallel to infuse innovation across the business. For example, we’re exploring a host of digital engagement and generative AI tools to better engage and interact with our customers. Our aim is to emerge as industry leaders dedicated to seamlessly embedding innovation into every aspect of our business. This commitment extends across customer experience, product development, operations and beyond.
Next, as I shared earlier, in 2023, we took initial steps to introduce a more thoughtful approach to pricing and packaging. In 2024, we will drive this new strategy even further with a base management program focused on retaining profitable customers, improving ARPU trends, strengthening our competitive position and reducing churn. Marc, will review this in more detail shortly.
Third, we are focused on fiber penetration growth and strategic network expansion in 2024. We continue to see positive trends in churn reduction, ARPU and increased satisfaction scores amongst our fiber customers. Given the trends and performance, we will continue to increase penetration of our fiber network and strengthen the experience of fiber migrations for our customers. Our current footprint today covers some of the fastest growing cities in the country. That combined with our more proactive approach and how we go to market in new communities sets us up well to drive growth by expanding our footprint through new build and edge out. This brings us to our fourth lever, which is our segmented hyper local go-to-market approach and a new brand strategy.
In support of these plans, in Q4, we hired an experienced Chief Marketing Officer to elevate our go-to-market and brand strategy. We also brought on a new leading advertising agency of record and plan to reintroduce our brand and a new platform, new values and evolved creative positioning to enhance our brand image in the market. This new Optimum brand and marketing approach combined with our newly formed regional Optimum market structure will ensure that we are resonating with customers and that we are competing for every jump ball to drive growth.
Next, we will continue to simplify customer interactions and experiences. We made great progress in 2023 on this front and continue to upgrade tools, processes and technology to simplify how our customers interact with us and how we communicate with them. We remain focused on enhancing our reputation as a company that’s easy to do business with and one that will solve issues right the first time every time. And this customer centric approach will contribute to us structurally reducing operating expenses. CX remains foundational to all the work we do across the company and is embedded in our company culture.
And last, as we continue to focus on fiber upgrades, DOCSIS upgrades and total passings expansion, we are committed to doing so with financial discipline, aiming to keep capital intensity stable year-over-year in-line with 2023 levels. Now before I hand it over to Marc, I want to reiterate that the strategy we put in place one year ago is already driving operational improvements and positioning us for growth.
We will continue to operate with financial discipline, with deliberate capital allocation and balance sheet management. We are focused on execution and efficiency as we continue to take the actions necessary to improve our performance and strengthen the business. This includes a heightened focus on our core operations and a strategic effort to maximize our total asset portfolio. I am extremely proud of the goals we accomplished in 2023. And building off this foundation, I am fully confident that we are on the right path to return to sustainable long-term customer, revenue and EBITDA growth over time. And in 2024, we will take another step in the right direction.
With that, I’ll turn it over to Marc to review our Q4 and full-year performance in detail.
Marc Sirota
Thank you, Dennis. Turning to Slide 6, I’d like to begin with a review of our financial performance. In Q4 2023, we reported total revenue down 2.9% or down 2%, excluding the News and Advertising segment. This was driven by a 2.8% year-over-year decline in our residential business, a 1% growth in our Business Services segment and a 15.7% decline in our News and Advertising segment. It’s worth noting, however, that excluding political ad revenue, News and Advertising revenue grew 8.9% in the fourth quarter.
Total revenue trends were mainly driven by decreases in our residential subscriber base over the last 12 months. But notably, in the second half of 2023, we showed significant improvement in the rate of revenue decline across segments. This was driven by successfully implementing a disciplined approach to rate and volume, preserving more ARPU as well as tactfully employing AI tools, better base management strategies and maximizing profitability in our retention centers. We also saw significant improvement in our year-over-year declines in EBITDA with Q4 ‘23 adjusted EBITDA just down over 1% in the fourth quarter. In comparison, we reported an adjusted EBITDA decline of 15.7% in Q4 of 2022 versus 2021, demonstrating a significant moderation and the rate of year-over-year adjusted EBITDA decline.
In 2023, we stabilized our operating expenses compared to the prior year, which peaked in Q4 of 2022 at $680 million excluding share-based compensation. In comparison, our operating expenses for Q4 of 2023 were $653 million a 4% decline in OpEx year-over-year. Improved adjusted EBITDA trends yielded better free cash flow trends in the back half of 2023. In the full-year, we generated $122 million of free cash flow and $322 million in the second half of the year, offsetting the losses from the first half. In addition to improved adjusted EBITDA trends, free cash flow is supported by a step down in cash CapEx. In the fourth quarter cash CapEx declined to $295 million marking a consistent quarterly decline in our capital spend throughout the year.
Turning to Slide 7, we saw stable adjusted EBITDA margins, a step down in capital intensity and a corresponding step up in our operating free cash flow margins. Adjusted EBITDA margins in Q4 2023 were 39.2% and 39.1% for the full year. Our goal in 2024 is to keep margins relatively stable compared to 2023.
Turning to capital intensity, you can see that it peaked this year in Q1 at over 25%, and I’m pleased to report that we nearly halved this to 12.8% in the fourth quarter. This is a result of fewer fiber passings constructed and a more disciplined approach to capital spending due to the thoughtful governance practices around capital project prioritization. Full-year capital intensity was 18.5%, which we believe is the right level to efficiently run the business today while also continuing to invest and upgrading the network to support future growth.
Our outlook for the full-year 2024 capital is to moderate versus 2023 in the range of $1.6 billion to $1.7 billion. We are strategically investing capital in the best growth areas for the business drive both near-term improvements and long-term sustainable growth. We are taking a more disciplined approach to our fiber construction by targeting markets that yield the best ROIs recognizing we have a low move environment which limits how quickly we can grow on this front.
To that end, we will expand fiber passings to about 3 million homes by year-end and focus more on driving migrations of customers to this incredible network. Additionally, we will add a total of 175,000 new passings compared to 165 new passings in 2023. And we will continue to invest in network quality improvements and best-in-class product developments across the business within our CapEx envelope.
Last, on our operating free cash flow margins or EBITDA less CapEx margins, Q4 ‘23 margins were 26.4% or 20.6% within the full year. Again, we saw significant step up over the course of ‘23 driven by stable adjusted EBITDA margins and a notable step down in CapEx.
Turning to Slide 8, I’d like to review our recent ARPU trends and base management strategy that Dennis previewed. Q4 2023 ARPU grew 0.1% year-over-year or $0.15 higher than Q4 ARPU of the prior year. Even with the headwinds of continued losses of video subscribers, we’ve been able to offset ARPU declines by driving mobile penetration, reducing churn and implementing AI into our care and retention centers to maximize profitability with advanced customer lifetime model.
Accordingly, as we mentioned during the last earnings call, we have been evolving how we price and package services as well as how we strengthen our customer relationships by providing the best in price in value packages. Our overall growth is to provide clear transparent pricing will driving meaningful increases in profitable customer relationships. A few weeks ago, we introduced new rational everyday pricing as our new rack rates, resulting in offer and build transparency.
For broadband services, new everyday prices will be lower than prior rack rates across most speed tiers. It’s worth pointing out that historically less than 10% of our customers were paying full rack rates and specifically on broadband, less than 5% were paying full rack rates. We also began speed rightsizing to provide more value to our customers, specifically in Q4 we reached more than 100,000 subscribers in the Northeast with this approach. Overall the [speed] (ph) has received well by customers with very few requesting downgrade.
Additionally, we saw both churn reductions and lower contact rates in customers who were upgraded compared to a measure control group. These results underscore that moving customers to higher speed tiers strengthens the price value equation, leading to lower churn and improved customer satisfaction, which will ultimately translate to stronger customer lifetime value for the business. At the core of our current and future base management strategy is the integration of artificial intelligence and machine learning capabilities to create sophisticated models and customer programs. This will allow us to make smarter, customized, data driven decisions and how we interact with our customers. We have been testing the deployment of AI capabilities in some of our retention centers using data to predict churn propensity based on specific retention offers.
As a result, we have seen an increase in the profitability of customers who engage within our retention centers. This work will continue and will expand across the care centers and other areas of the business. At last, we will continue to drive sell in and connectivity products with broadband and mobile at the forefront. With 7% mobile penetration of our broadband base, we have significant opportunity to drive additional mobile take rate within our existing customer base and sell into new customers.
Overall, this transformation of our base management strategy will lead to long-term benefits to churn, customer satisfaction and customer lifetime value and will have a de minimis impact on our near-term revenue and residential ARPU trajectory. With a more disciplined and thoughtful approach to how we implement these changes, we are better positioned to improve ARPU trends over time.
Turning to Slide 9, I’d like to review our balance sheet position in recent proactive management. In January of this year, we issued $2 billion of senior guaranteed notes due January of 2029 at a rate of 11.75% to pay down the outstanding term B loan and the incremental term loan B-3, which were due in 2025 and 2026. In conjunction with this transaction, we announced that we would pay down the $750 million senior note due in June of 2024 with a draw from our revolving credit facility for which we had previously earmarked capacity. These two proactive refinancing activities have successfully cleared out all near-term maturities until 2027 giving us the runway to continue to operate and drive the business toward growth.
Our weighted average cost of debt pro forma for these transactions is 6.5% and our weighted average maturity is 5.1 years. Our fixed rate to total debt is 86% inclusive of floating to fixed interest rate swaps and pro forma at the end of 2023, we have $1.2 billion of liquidity, providing us the flexibility in daily operations. We will continue to be proactive in managing our debt maturities and evaluate how our capital structure best supports our operating goals.
Next on Slide 10, I’d like to review our subscriber trends, highlighting by the acceleration of our fiber and mobile growth. In Q4 2023, we added 46,000 fiber customers through both new net additions and migrations of existing customers. We previously said we would put more focus on migrations and by doing that we achieved penetrations of over 12%, which is an increase of almost five percentage points from the end of the prior year. Plus with a more disciplined focus on growing our fiber penetration, we’ve identified opportunities to improve processes and systems related to fiber migrations, which we believe will allow us to accelerate our rate of penetration even further in the coming months.
Regarding mobile, we continue to accelerate the pace of net adds each quarter adding 34,000 lines in the fourth quarter. This growth is over eight times better than Q4 of 2022 when we added just 4,000 lines. We are pleased with the trends we are seeing in mobile. For example, when customers take mobile in addition to our broadband product, we see a 20% annualized churn reduction compared to the fixed only customer base. This presents a significant opportunity to further reduce churn as we expand mobile penetration in our customer base and drive higher take rates.
Next, on our total broadband subscriber trends, as we mentioned last quarter, similar to our peers, we saw heightened competition around the holiday season in Q4. That, in addition to continued challenging macroeconomic environment and a low move activity, impacted our broadband performance as reported a loss of 27,000 total broadband subscribers.
Although we saw some incremental headwinds in Q4, which may carry over into the beginning of 2024, we are confident that we have the right strategy in place. With broadband and mobile combined with enhanced base management programs, the strategic regional and hyper local go-to-market approach, network upgrades, dedicated customer care focus and financial discipline, we are well-positioned to return to positive broadband subscriber trends over time.
Before we turn to the next slide, I would like to touch on our participation in the Federal Affordable Connectivity Program. We remain committed to bridging the digital divide by providing affordable and accessible internet and mobile services to our customers, and we are fully supportive of continued funding for the program. At the end of Q4, we had 125,000 customers receiving a subsidy on their broadband or mobile services through ACP.
Given our limited exposure, we do not foresee a significant impact if the federal funding concludes. Additionally, we will be proactive in our efforts to engaging with these customers and providing compelling retention offers. We also see this as potential tailwind and an opportunity to attract new customers with plans in place to go after every jump ball.
Turning to Slide 11, I’d like to wrap up with some of the key performance drivers that give us confidence that we can have the right long-term plan and that underscores our commitment to delivering the best network experiences and services to our customers. NPS scores across our base continuing to improve with tNPS growing 21 points in Q4 2023 year-over-year. We also continue to drive increased usage of self-service tools across technical support, customer care and onboarding. In fact, self-installation has grown 68% year-over-year in Q4.
Furthermore, self-service tools, improved customer communications and enhanced network quality experiences led to 1.7 million fewer inbound calls and 300,000 fewer truck rolls in full year 2023 compared to the prior year. While a portion of these improvements are driven by fewer customers in our base, more notably the rates per customers continue to improve. On our network achievements, we launched 8-gig symmetrical speeds in 100% of our East Fiber footprint in the early part of 2023 and now customers can take speeds of 1-gig or higher in 96% of our total footprint. Additionally, as of Q4, we had upgraded 93% of the West to DOCSIS 3.1 with plans to reach nearly 100% by the end of 2024.
In summary, we are pleased with our achievements in 2023 and our capital investments plans for 2024 are strategically designed for both near-term and long-term returns for the business, ensuring we sustain excellence in our network, customer experience and business growth.
With that, we will now take questions.
Question-and-Answer Session
Operator
Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from Michael Rollins from Citi. Your line is now live.
Michael Rollins
Thanks and good afternoon. Curious if you can unpack a bit more of what you’re seeing in terms of broadband volume and some of the cited headwinds that carryover early into 2024. And then just secondly, if you could discuss a bit more about the pricing strategy and just maybe some additional details on how you’re managing the change in price relative to the ARPU performance? Thanks.
Dennis Mathew
Hey, Michael. I hope you are well. In terms of the broadband headwinds, as we had mentioned early in the quarter last year, we expected to see some headwinds and that’s exactly what we saw. We saw some of the competition early in the quarter really outspending us in advertising and marketing, particularly in that October and November timeframe, effectively reducing our share of voice in the market.
And we also saw some more aggressive promotions during key mobile switching windows and really more aggressive offers driving existing mobile customers to low-end data plans particularly when you look at some of the fixed wireless providers. We also saw some impact in the West, as we think about the fiber over builders in the back half of the year, more fiber build activity. I think the last time I commented on this, we were at about 30% to 35% overbuilt. Now we’re at about 40%, and some fairly aggressive offers in the market.
That all being said, I’m very excited about our Optimum market structure and local leadership that we’ve put in place. And these teams are just coming online and really starting to share some insightful feedback with us in terms of competitive landscape and really informing how we can compete much more effectively at a hyper local level. I think we’re very well-positioned. Optimum Complete continues to perform very well. We’ve seen a 3x increase in mobile attach since we’ve launched Optimum Complete.
We are really excited about the new Chief Marketing Officer that we brought on Board, and she’s helping us with hyper local go-to-market playbooks so that we can compete more effectively in our new Optimum market areas that we’ve established. And so, you’re going to see more of those playbooks come online and we’re also planning to really do a better job of telling our story from a brand and just an overall marketing perspective.
On the pricing side, as you saw, we’ve made some adjustments and we’ve talked about this pricing evolution and the pricing strategy is really to address what our customers are telling us. They’ve told us they want simplicity, transparency, predictability. They want the right value for what they’re paying. And we believe that the new structure will do just that. And I think Marc mentioned, some of it is tied to just rightsizing folks.
Over a 100,000 customers received a speed upgrade tied to this evolution, and we’re seeing improved churn, fewer calls from those customers and that journey is going to continue. We’re also leveraging AI, so that we can equip our teams in our call centers, both care and retention, so that when an existing customer calls, we can right size them and put them into the right packages and make sure that they’re getting the right value. And this is actually helping us reduce ARPU erosion while not sacrificing our ability to save customers.
And so, we’re continuing to drive that strategy forward and we believe that long-term this will help us actually grow ARPU and really helping our mission to stabilize and ultimately drive customer revenue and cash flow growth.
Michael Rollins
Thanks.
Dennis Mathew
You’re welcome.
Operator
Thank you. Next question is coming from Ben Swinburne from Morgan Stanley. Your line is now live.
Ben Swinburne
Thank you. Dennis, thanks for all the commentary around the base management and pricing stuff, very helpful. I guess, I was wondering if you could talk a little bit how far along you are in getting your customer base to a place where you don’t have a back book, front book issue anymore and price increases yield ARPU growth. It seems like you’ve been working a lot on this over the past year and the ARPU is definitely stronger than expected in Q4.
So, I’m curious if you could give us a little more of a sense of timing and sort of what’s ahead for that project? And then, I guess on the fiber build for ‘24, I guess I’d be curious, one, where that’s focused? Is that all Optimum East? I think you said 3 million homes by the end of the year. And did you guys consider slowing it down more just to prioritize the balance sheet and sell more into the existing footprint. Just wondering if you could talk about your thought process there? Thank you.
Dennis Mathew
Ben, thanks. Hope you’re doing well. Let me take the fiber question and then I’ll throw it back over to Marc to expand a bit more on the front book, back book and the pricing. But, our fiber strategy, we remain committed to fiber. As we mentioned, we’re going to deliver 3 million homes passed, primarily in the East. We’re excited about having these homes and the performance of the customers that were able to add on to that network improved ARPU trends, improved churn, improve customer satisfaction. We have customers that are just incredibly excited and thrilled with the performance of that network.
And so, we want to lean in and focus on driving more customers to that network. And that’s going to be the mission for this year. We’re prioritizing migrations in particular. We’ve been on that journey. We’ve been able to, if you look year-over-year in terms of fiber additions, we’ve accelerated by 1.7x and there’s more room to grow. We’ve been doing an exhaustive audit of the migration process and as we brought on as my new CTIO organization and field organization, they’ve identified a whole host of opportunities to improve the process, make it more efficient and help us accelerate our fiber migrations.
And so, there are some systems and process issues that we need to resolve over the next couple of months. But I’m confident as we enter into late Q2 and the second half, we’re going to be able to accelerate. And then, we’re excited about new build as well. And so as we think about just capital intensity and how we’re going to spend capital and where the best return is, we’re really fortunate to have four of the fastest growing markets in our footprint. And we’ve had to do some work in terms of streamlining our ability to identify, approve and execute new build and I think we’re going to start seeing some of the benefits of that and be able to go faster as we enter into this year.
And so, that’s going to be a huge priority for us as well. And we’re going to look to prioritize migrations and new build, while continuing to have a balanced approach in building fiber in the East. Marc?
Marc Sirota
And then Ben, to your question around how far along we are, as you see, we’re pleased with the trajectory that we’ve been able to put on the Board here in the second half of the year around slowing the rate of rate erosion and really for the first time in nine quarters we had a positive quarter on ARPU.
So, really pleased about that. But I would still say that we are very much in the very early innings of this transformation around pricing. We are launching our advanced AI capabilities to each of our call center reps and field sales reps and that’s going to take a little bit of time over the course of this first half of the year. And so, we still have work to do and we do think that will ultimately close any potential issues we have on back book or front book. And, we feel like we can compete with the right offers with Optimum Complete and provide real value to acquire customers. And, then also provide the right value for our existing customers as well. So, still early days but optimistic on the trends that we see.
Ben Swinburne
Thanks a lot.
Operator
Thank you. Next question is coming from Kutgun Maral from Evercore ISI. Your line is now live.
Kutgun Maral
Good afternoon, and thanks for taking the questions. I appreciate that you’re not providing explicit guidance for EBITDA or free cash flow for 2024. But, I was hoping you could help us think about some of the moving pieces. First on EBITDA, given the topline trends in your outlook for relatively stable margins, it sounds like 2024 will be another transition year with EBITDA declines.
Is that the right way to think about it? Or could we see some of the positive momentum you’ve shown at the end of last year maybe carry into 2024 and manifest in more flattish to perhaps positive EBITDA trends? And relatedly on free cash flow, it’s certainly encouraging that you’ve cleared up all the maturities until 2027. So, now we’ll see a bit more of an interest burden. Your CapEx guidance implies it will be flat to perhaps down a bit. I’m not really sure how cash taxes shake out. So just going through all these puts and takes, can you talk about your confidence in keeping free cash flow maybe relatively steady year-over-year or at least having it be positive again? Thank you.
Marc Sirota
Absolutely, I’ll take that Kutgun, good to hear from you. From an EBITDA perspective again we’re pleased on the stabilization that you’ve seen in the margin over the course of the back half of this year, really excited about how we are being disciplined around operating costs and then the rate discipline that we just talked about.
So that does give us optimism around how we’re performing going into 2024. I would expect EBITDA to be slightly down year-over-year but we’ll continue to moderate our capital spend as we talked about. And so from a free cash flow perspective we are still optimistic that we will be positive for the full-year of 2024. And despite the higher interest rate costs some of the cash timing on that should be more, later into 2025 actually. And so, we should feel like we’re in a good position to be positive free cash flow for 2024.
Kutgun Maral
Understood. Thank you.
Marc Sirota
Yes.
Operator
Thank you. Our next question is coming from John Hodulik from UBS. Your line is now live.
John Hodulik
Yes, great. Couple of follow ups if I could. First of all, just a commentary on the everyday pricing and the pressure on ARPU, are you guys sort of suggesting that we could go back to sort of the 2% to 3% declines where we were just a few quarters ago after the moderate growth that we saw today. And then on the mobile big ramp in net adds, I guess if you can boil it down what’s really driving that ramp and do you expect it to continue? Thanks.
Dennis Mathew
Thanks, John. I’ll take the mobile piece and then Marc, welcome to chime in on the pricing and ARPU elements. But mobile, we’re very pleased with the transformation and the acceleration. This has really been inspecting and optimizing every area of the business. We’ve transformed our retail centers into sales centers and we’ve really prioritized, as we’ve said, to be the connectivity provider of choice, which includes broadband and mobile. And so, we’ve updated our compensation plans. We’ve updated our sales goals. We’ve transformed performance management and participation, Optimum Complete and including that as an offer and a package has been really well received both by our frontline teams as well as our customers.
And so, as I think about this year, I think about continuing to drive acceleration and growth in that space. I think we’ve seen others, some of our peers set the standard in terms of net additions per quarter and customer penetration of their base. And I think those are all achievable long-term and that’s the journey that we’re on.
And so, the 8x acceleration, we’re going to continue to drive that across the business. And, I think we’re at 7% mobile penetration of our base today. I think there’s more opportunity. I’m particularly excited as Marc, I believe mentioned 20% annualized churn reduction with mobile. And so, there’s lots of reasons to continue to drive mobile and will continue to drive acceleration throughout the year. Marc?
Marc Sirota
And then John, on the ARPU declines, now we feel like we’re in a good position as you saw with the trends. Certainly there’s going to be continued pressure from video losses on ARPU, but despite that and our more disciplined approach in leveraging AI tools, We do feel like we have a path to stabilize ARPU and grow it over time.
If you look at 2023 for the full-year, we were down just 1.5% year-over-year relatively flat especially coming out of the back half. We expect to improve on this in 2024. So, we feel like we have the right tools in front of our agents to drive the right outcomes. And, feel good about that.
John Hodulik
Thank you, guys.
Operator
Thank you. Next question today is coming from Jessica Reif Ehrlich from Bank of America. Your line is now live.
Jessica Reif Ehrlich
Two questions, if it’s okay. One, I just love your views on the sports JV that was announced with Disney, Warner Brothers, Discovery, and Fox. Just how that you think that impacts your business, video and broadband and how it might impact renewal conversation? And then separately, you showed good growth in advertising, ex-political and news, could you talk about where that’s coming from and kind of your outlook in the, I guess, couple of quarters ahead?
Dennis Mathew
Jessica, I hope you’re well. I’ll take the sports JV question and Marc, if you want to talk a little bit about news and advertising. I think I’ve said this before, but unfortunately I’ll reiterate that I really do think that the model is broken and it’s really challenging when you think about the fact that viewership is that all-time lows on linear traditional video and yet rates are at all-time highs.
And so, I think we as distributors really do need to work with our partners to put the customer back in the center and make sure that they’re getting the right value. And so, as we have these conversations and negotiations, that’s exactly what we’re trying to do. We’re trying to really push hard and make sure that we’ve got, we’re fighting for our customers in terms of rate.
Historically for legacy process has been to include channels with extremely low viewership bundled in with channels with high viewership, it’s just not the right approach and inflexible packages. And so, we’re fighting for more flexibility as well, so that our consumers can ultimately have the types of bundles and packages that they’re looking for.
And then as these direct to consumer solutions continue to become available, having those conversations, making sure that they’re available to our customers and that they can be leveraged as part of the portfolio of solutions that we are making available. And so, these are the conversations that we’re having. It really does come back to putting the customer at the center and making sure that we have the right pricing, the right packaging, the right channel lineups, the right direct-to-consumer offerings.
But, ultimately for all these solutions, you need broadband. So, it does strengthen the value of broadband and we want to be able to provide the highest quality broadband quality and price and one of the top applications leveraged on broadband is video. And so, we want to be able to make the right video solutions available and that’s what’s driving the consumers as they have some want to watch traditional linear video, others want streaming. We need to be able to bring that to our consumers at the right price and at the right value and those are the conversations we’re having. Marc?
Marc Sirota
And then on advertising, certainly 2023 was a challenging year for all of us in the ad space, but really pleased on how the segment operated this year and managed through that. We were able to offset some of those declines by just expanding actually our customer base and still having more customers. And then really some thoughtful investments in our advanced advertising agency business is really were the accelerant to drive the growth that you have seen over the past few quarters.
So, as we look ahead to 2024, we feel positive about where we’re trending it’s certainly going into the new political year, it should be a pretty good tailwind for our news and advertising segment.
Operator
Thank you. Next question is coming from Craig Moffett from MoffettNathanson. Your line is now live.
Craig Moffett
Hi, thank you. I’m going to see if I can squeeze into as well. First, I know you guys, especially Tony, you’ve spent a lot of time talking about ARPU I wonder if I can just dig in one last time maybe on just broadband ARPU specifically, even though it’s growing year-over-year, it took about a 1.6% sequential decline, granted that bundling, allocations and that sort of thing can fuzz that up a little bit. But I wonder if you could just talk about whether that is, indicative of anything that’s happening with respect to the base management program that you described? And then second, if you could just talk a little bit about your mobile economics. We don’t know much about your MVNO and the larger MVNO in the industry is shrouded by a lot of secrecy. I wonder if you could just share some at least directional guidance on the kind of margins you expect to be able to make in that business at least at the gross margin level?
Dennis Mathew
Craig, hope you’re well. Let me let Marc jump in on the broadband ARPU question and I’ll talk a little bit about mobile.
Marc Sirota
Yes. Hi, Craig. From a fourth quarter perspective, this is usually a low point for the year as far as customer roll-off and promotional roll-off, increased promotional activity happens typically in the fourth quarter, so this is usually a seasonally low quarter for us in this space. I’m pleased to see that we were able to moderate the fourth quarter seasonality that we’ve seen traditionally pretty meaningfully and so although down, I would it’s not indicative of the price changes that we announced here at the beginning of the year. So, feel good we have the right tools in place to manage through that.
Dennis Mathew
Yes. We’re very happy with our mobile MVNO and our partner in having access to the largest 5G network. Our mobile margins, we’re also happy that we are gross margin positive. We don’t break out additional detail, but we’re really happy with the performance. We continue to see acceleration as I mentioned meaningful acceleration in our sales activities also in terms of attaching lines. We’ve been able to grow that to now 1.5 lines and there’s more upside as we just start continue to get our legs under us. We have today about 50-50 in terms of BYOD and device attach.
And so, there’s opportunity there to continue to right size that and continue to lean in as we again, get our sea legs under us. And so, we’re in the early inning. We’re really just starting to sell accessories and insurance, but we’re excited particularly about the churn benefit as I mentioned and we’re excited about continuing to drive mobile as there is long-term margin expansion opportunity.
Marc Sirota
And the only thing I would add is just on the ARPU side from mobile perspective, we are seeing growth in that as well. One, coming off the fact that we’re no longer selling free services but then also with Optimum Complete we’re really starting to see meaningful growth in the ARPUs coming out of that bundle package up $5 actually sequentially from the third quarter. So, all signs are going in the right direction.
Craig Moffett
Thank you.
Operator
Thank you. Next question is coming from Vikash Harlalka from New Street Research. Your line is now live.
Vikash Harlalka
Hi. Thanks so much for taking the question. Now, that you’ve raised $2 billion in debt, how do we think about any potential ABS debt? Is that completely off the table or I see working on that. And if you do, what would be the potential usage of those funds? And second one, if I could, could you give us a sense of what the IRRs are for the new builds versus fiber upgrades? And how you sort of decide whether we go for additional new build versus fiber upgrades during the year? Thank you.
Marc Sirota
Hi, Vikash. I can take both of these. As it relates to the $2 billion refinancing really pleased that we were proactive and we cleared the deck for the next three years for us to operate especially given the uncertainty around the interest rate markets and where they’re heading into this year. As it relates to ABS, we certainly have learned more about the process involved in an ABS transaction and just this as you may know just takes time and so I still think it’s very much a possibility. But, now that we’ve cleared out the near-term maturities, we have a little bit more flexibility in getting the timing and the sizing done properly. So still out there, but it just takes time to do that.
And then as it relates to IRRs, we just have not historically disclosed those externally, but especially as you think about the fiber builds, we’re definitely seeing improved results coming out of that from churn reduction to ARPU lift all of which are better than our original base case scenario, but again we’ll just remain disciplined around the level of capital intensity to drive ultimately free cash flow and invest the next dollar in the spot that’s going to give us the highest yield.
Dennis Mathew
That’s right. The only thing I’ll add is that, as we’ve done with every part of the organization, we are revamping and evolving our ability to identify, deliver, execute, deliver and drive penetration of new builds. And so, as I mentioned, we have four of the fastest growing markets in our footprint. And so, these are good problems to have in terms of driving making investment decisions.
Operator
Thank you. Our final question today is coming from Bryan Kraft from Deutsche Bank. Your line is now live.
Bryan Kraft
Hi, good afternoon. I want to ask you, I guess, the $16 billion to $17 billion CapEx guidance combined with the capital intensity guidance implies a pretty wide range.
Marc Sirota
Just to correct, the $1.6 billion to $1.7 billion. We’re not —
Bryan Kraft
Excuse me, sorry. I just forgot the decimal point.
Marc Sirota
It’s a point of clarity.
Bryan Kraft
We don’t want a list situation. So, that capital intensity implies a pretty wide range of 2024 revenue, if you combine that with the 18.5% capital intensity guidance, so I think that implies about $8.65 billion to $9.19 billion. I just wanted to ask, I guess, first, how much Cheddar revenue was in 2023, which would explain some or all of that revenue decline? And then whether you expect 2024 revenue to really be in that wider, if your expectations are really that wide of a range or if it’s more narrow than that? Thank you.
Marc Sirota
Yes. We won’t get into, this is Marc, we won’t get into specifics around the Cheddar revenue and all of that, but just say that it was de minimis and not material to the financial results of the company. As we think about the capital intensity, again, we’ve stated that we’re going to remain disciplined around how we drive capital intensity.
We feel optimistic that we’re making the right strategic moves and have the right playbook in place to drive revenue, we won’t give specific guidance here today on the revenue outlook, but we feel like we have the right playbook in place to drive our revenue trajectory and we’ll kind of just leave it at that today.
Bryan Kraft
Marc, could I just ask one quick follow-up on the 18.5% capital intensity? Is that a multi-year comment, at this point? Should we think about that as being long-term guidance or is that more of a ‘24?
Marc Sirota
Bryan, that’s a great question. As we said and I’ll reiterate today, we will re-evaluate capital intensity every year. And, really be disciplined around how the business is performing to really dictate how much we’re going to spend. And again on the 18.5% we are saying we will moderate slightly from that to drive those results.
Bryan Kraft
Okay. Thank you.
Operator
Thank you. We’ve reached the end of our question-and-answer session. I’d like to turn the floor back over to management for any further closing comments.
Sarah Freedman
Thank you all for joining. Please reach out to Media Relations or Investor Relations with any additional questions.
Dennis Mathew
Thank you. Have a good day.
Operator
Thank you. That does conclude today’s teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.
