Frontier Communications Corporation (FTR) Q1 2019 Earnings Call Transcript

FTR earnings call for the period ending March 31, 2019.

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Frontier Communications Corporation  (NASDAQ:FTR)
Q1 2019 Earnings Call
April 30, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Frontier Communications First Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Luke Szymczak. Please go ahead sir.

Luke Szymczak -- Vice President of Investor Relations

Thank you Brad. Good afternoon and welcome to the Frontier Communications first quarter earnings call. My name is Luke Szymczak Vice President of Investor Relations. With me today are Dan McCarthy, President and CEO; and Sheldon Bruha, Senior Vice President and Interim CFO. The press release earnings presentation and supplemental financials are available in the Investor Relations section of our website frontier.com.

During this call we will be making certain forward-looking statements. Forward-looking statements by their nature address matters that are uncertain and involve risks, which could cause actual results to be materially different from those expressed in such forward-looking statements.

Please review the cautionary language regarding forward-looking statements found in our earnings press release and other SEC filings. On this call we will discuss certain non-GAAP financial measures. Please refer to our earnings press release for how management defines these measures, certain shortcomings associated with these measures and reconciliations to the closest GAAP measures. I will now turn the call over to Dan.

Daniel McCarthy -- CEO

Thank you, Luke. Good afternoon, everyone and thank you for joining us. Please turn to Slide 3. We had solid results in the first quarter with revenue up $2.1 billion, down about 1% sequentially. Both Consumer and Commercial revenue had similar performances in the quarter. Consumer and customer churn and Consumer ARPC increased slightly sequentially. Adjusted EBITDA of $873 million declined sequentially as a result of expense seasonality and revenue declines partly offset by transformation benefits. I am pleased that we continue to make progress with our balance sheet, turning our runway through the end of 2021 with the issuance of $1.65 billion in secured notes maturing in 2027. We also closed a previously announced asset disposition with sale proceeds of $76 million. We will continue to explore opportunities to sell assets where there is a potential to reduce debt in a prudent way. And Sheldon will provide more details on our capital structure shortly.

Turning to our transformation program. In the first quarter, we obtained approximately $8.7 million in benefits from transformation. This represents a $35 million benefit on an annualized basis. As you will recall our target is to realize an EBITDA benefit of between $50 million and $100 million over the course of calendar year 2019.

We anticipate that this will be back-end loaded to the second half and particularly weighted to the fourth quarter. And we are targeting to exit 2019 with benefits at roughly a $200 million annual run rate. We continue to make progress with specific elements of the transformation program in the first quarter. For example, we now have 9 initiatives that have been completed versus the four we discussed in the fourth quarter. Also, 23 solutions are in various stages of being scaled. This includes 11 in capture phase, which when fully completed could represent an opportunity of more than $100 million annually. Another 12 are in earlier phases of being scaled. We believe the transformation program will accelerate further as we increase the number of initiatives under way.

As discussed last quarter, the initiatives that are most mature remain in the area of field force. And we continue to be pleased with the progress we have achieved in field efficiency and customer satisfaction. We continue to see improving trends as a result of initiatives in technical support. For instance, we have been able to reduce repeat rates, the number of unnecessary truck rolls and the number of customers needing to contact us for system troubles and service orders. We've also been expanding our efforts related to sales management as well as churn.

Please turn to slide 4. Turning to Broadband. Total Broadband net losses were $38,000 in the first quarter. This represents a substantial improvement from the $67,000 loss in the fourth quarter of 2018. The largest driver of improvement was consumer copper broadband where we lost more than half to 21000 units in the first quarter. We were hoping to achieve this improvement last year, but I am pleased that our work has ultimately yielded results. This represents the best consumer copper net unit performance since the closing of the CTF acquisition three years ago. We also achieved an improvement in fiber broadband with net losses improving from the fourth quarter level.

Please turn to slide 5. We had a minor sequential uptick in consumer customer churn in the first quarter. This reflects a higher rate of video losses in the first quarter, and we were successful in being able to more than offset the sequential increase in churn with stronger Broadband gross additions. This illustrates the progress we've made with targeting, marketing and channel performance. We remain very focused on a full range of churn initiatives that address the various portions of the life cycle of customers. Looking at our overall subscriber performance, we continue to focus on managing to customers' needs, while at the same time improving the trends in the business and increasing the efficiency of demand generation.

Before I conclude, I'd like to say that I am pleased to see that the SEC is beginning to move forward with planning for the next phase of the CAF program. We look forward to the SEC releasing its rule-making later this year so that we will have further details about the evolution of the program. In summary, our transformation initiative is targeting $200 million in EBITDA run rate improvements by year-end 2019 and $500 million by year-end 2020, and the entire organization is committed to achieving these objectives.

As you know the challenge of our business is that we have ongoing declines in legacy products. These declines have been offsetting growth we achieved in newer products and also may offset benefits from the transformation program. Our goal is to improve the legacy revenue headwinds and accelerate newer product revenue trends while remaining focused on our long-term goals of improving unit trends, realizing our transformation program targets, driving free cash flow and reducing leverage.

I'll now turn the call over to Sheldon to discuss our financial performance in more detail.

Sheldon Bruha -- Chief Financial Officer

Thank you, Dan. Good afternoon, everyone. I will update you on our first quarter financial performance. Commencing with this quarter we will report only on the basis of ASC 606 revenue recognition standards.

Please turn to slide 7. Our first quarter revenue was $2.1 billion, down 1% sequentially. We had a loss in the first quarter of $87 million. Let me call out a few items related to this loss. Firstly, we had severance costs of $15 million. Secondly, we had a $20 million loss resulting from the write-off of remaining issuance costs associated with debt that was retired during the quarter. This was non-cash. And thirdly, we had $18 million of tax expense in the quarter, which was driven by the establishment of additional valuation allowances for certain state deferred tax assets.

Net cash from operating activities in the first quarter was $282 million. The reduction from the fourth quarter level of $603 million were the result of cyclicality of cash interest payments. Our cash interest payments are significantly higher in Q1 and Q3, and lower in Q2 and Q4, so this result reflects our normal quarterly pattern. We continue to execute well in managing expenses in the first quarter. Adjusted operating expenses were $1.228 billion, stable sequentially despite seasonal headwinds typical of first quarters. First quarter adjusted EBITDA was $873 million, a sequential decline of approximately 2%. Adjusted EBITDA margin of 41.6% declined sequentially and we continue to target adjusted EBITDA margin above 40%. Trailing four quarter operating free cash flow in Q1 was $643 million.

Please turn to slide 8. Looking at our components of revenue, Data & Internet services revenue increased sequentially with Consumer Broadband and wholesale contributing to this increase. Both Voice and Video services revenue declined sequentially consistent with past trends and the underlying business dynamics. In Consumer Data & Internet services revenue grew sequentially but this is offset by sequential decline in Voice and Video services revenue, yielding a sequential decline in total Consumer revenue of 1%. In Commercial, total revenue was down 1% sequentially. Wholesale revenue was stable, while SME experienced sequential decline. Lastly, regulatory declined slightly sequentially.

Please turn to slide 9. Monthly consumer ARPC was $89.14, sequential increase of $0.77. We continue to improve our base management as customers migrate off commercial packages. Partly offsetting this was (inaudible) unit declines in Video.

Please turn to Slide 10. Capital spending in the first quarter was $305 million. The focus area of our capital spending remains consistent. As Dan mentioned last quarter we are in the process of deploying 10-gigabit capability across our fiber footprint. This will support our Commercial activities by enabling an even more robust portfolio of Ethernet services and providing a road map for 5G backhaul, as well as future-proofing our Consumer Broadband services.

Connect America Fund buildouts remain an important focus this year. We added about 10,000 locations in the first quarter for a total of 496,000 locations. The slower rate of building in this quarter reflects the impact of winter weather in many of the areas where we are building CAFs. And we expect the pace will increase now that we're into spring. We are also building fiber-to-the-home in certain rural markets to a total of 19,000 locations. We're leveraging state funding programs for these builds. Also we continue to lay fixed wireless broadband to fulfill some of our CAF requirements.

Please turn to Slide 11. We made progress on a number of areas on our balance sheet in the first quarter. In March, we issued $1.65 billion in eight year senior secured notes and used the proceeds to retire our primary Term Loan A facility as well as a smaller co-bank loan facility. As a result, we shifted out almost $400 million in amortization payments related to these two facilities that would have been due over the next two years and additionally extended the remainder of the maturity by six years from 2021 to 2027.

We also extended our $850 million revolver by two years from 2022 to 2024. On March 15th we repaid $348 million of maturing unsecured notes on schedule. Finally, as we discussed on the fourth quarter earnings call, we closed an asset sale of towers for $76 million in January. The result that we now have cleared the runway through the end of 2021, we have a modest term loan amortization remaining in 2019, $245 million of principal payments in 2020 and $327 million of principal payments in 2021.

These maturity amounts are each below our operating free cash flow guidance for 2019, which is $575 million to $675 million. Additionally at quarter end, we had $375 million drawn on our revolver. Executing on our priorities we reduce leverage and expand the range of options for capital structure. Nonetheless we continue to evaluate balance sheet alternatives as we remain committed to reducing debt and improving our leverage profile.

Please turn to Slide 12. Our 2019 guidance remains unchanged. For the full year we expect adjusted EBITDA of approximately $3.45 billion to $3. 55 billion, which includes $50 million to $100 million of benefits from our transformation program. We expect capital expenditure of approximately $1.15 billion, cash taxes of less than $25 million, cash pension and OPEB of approximately $175 million, cash interest expense of approximately $1.475 billion, and operating free cash flow of approximately $575 million to $675 million.

Also we continue to anticipate the costs relating to achieving transformation initiatives to be around $50 million in 2019. Looking toward the remainder of the year, we anticipate the companywide transformation initiatives will continue to contribute to improving trends -- to improving the trends in our financial results, and we remain focused on providing and improving operational efficiencies and driving free cash flow to reduce leverage.

I will now hand the call to the operator to open up the questions.

Questions and Answers:

Operator

(Operator Instructions) And our first question comes from Batya Levi with UBS.

Batya Levi -- UBS -- Analyst

Thank you. Couple of questions. First on the Broadband side. Can you provide more color on the Broadband churn versus gross adds in the quarter? And maybe specifically for the fiber footprints if there's anything to call out. And the improvement that we saw on copper and the CTF losses, did that track into April as well? Then second question on the EBITDA side. Can you provide maybe quantify the seasonal expense that you had in the quarter and the pacing of the transformation benefits through the years? Can we expect the first quarter level to be the trough for the year? Thank you.

Daniel McCarthy -- CEO

Batya, it's Dan. On the Broadband just to give you a little bit more color, we saw as you see sequential improvements on both fiber and copper. The fiber improvements were around sales to single double-play bundles, where we did see as I mentioned some uptick in churn in the triple-play base. But the incremental sales that we saw really offset the additional churn and that's why you saw the improvement on the net side on the fiber.

On the copper side the biggest improvement was on the legacy consumer base and it was really around churn. We did see some improvements in sales, but it was really around churn. And a lot of the efforts that we've been placing on improving churn levels on the copper side and on the fiber side associated with our transformation efforts, as well as a lot of other initiatives that have been under way really started to gain some traction on that. So we were very happy with the results that have started to flow through, but we have a lot of work to do to continue to improve the trends on the Broadband side, both on the fiber and the copper footprint. And we think there's a lot of opportunity especially on the churn side.

Sheldon Bruha -- Chief Financial Officer

Just on some of the EBITDA questions you had. You asked about some of the expense headwinds. In Q1 We had roughly $20 million related to some seasonal expense resets that occurred in the quarter. With regard to transformation as Dan mentioned we had about $8.75 million benefit in the quarter, $35 million on an annualized basis. We anticipate that transformation revenues should build over the course of the year. These benefits -- and also anticipate these benefits to be back-end loaded in the second half particularly weighted to the fourth quarter. The benefits will be sort of initially from operational and commercial and technical support with the revenue initiatives really contributing later in 2019.

Batya Levi -- UBS -- Analyst

And given those two items would you expect EBITDA to grow sequentially from the first quarter level?

Sheldon Bruha -- Chief Financial Officer

Yes. As you know we don't provide quarterly guidance. But I think you should take what I've mentioned around how the transformation benefits should phase for the year as well as just a reminder that do we have a typical summer seasonality in our business during Q2 to Q3.

Operator

Our next question comes from Matthew Niknam from Deutsche Bank.

Matthew Niknam -- Deutsche Bank -- Analyst

Hey, guys. Thank you for taking the questions. Just two if I could. One, if we could just think about Consumer ARPC, a nice bump again, higher in the quarter. You talked about rising Video losses typically that comes at a pretty high ARPU that leads, and so can you talk about what's driving the improvements in ARPC and if it is in fact customer bills resetting higher how you kind of balance that with higher churn? And then secondly in terms of the cost to achieve, I think, Sheldon, you may recall that I think it was $15 million in severance cost, but there's about $28 million in costs that are being added back in restructuring and other. And so I'm just trying to figure out what the sort of incremental was because that was a pretty big step-up in terms of the add-back this quarter relative to 4Q? Thanks.

Daniel McCarthy -- CEO

Sure, Matt. On the ARPC question we're very pleased as I mentioned last quarter in our approach and how we've refined it as far as managing our base. So that probably is one of the biggest impacts to the ARPC line. Having said that, you're absolutely right, video losses do come with a fair amount of revenue. So it won't always be a higher ARPC level each quarter, and that's not really a bad thing, because as we lose some of the video customers, even though it is a higher revenue, it really doesn't affect us from a profitability perspective anywhere near some of the other customers. And to give you a little bit of a flavor on the video losses for the first quarter, they were really a combination of what I would call normal secular trends that I think most of the other video providers are experiencing, but we shifted our emphasis to a little bit more on Broadband stand-alone as well as double-play Broadband bundles.

This shifted our gross additions mix more toward those two buckets and away from triple plays. And as we shifted away from those it actually is pretty positive from an acquisition cost perspective, which a triple-play acquisition cost could be three to four times that of a single or double-play without video. In addition during the quarter we did take some steps to evaluate the profitability of certain customers and made some decisions to step back from some larger longer-term bulk contracts that didn't have the pricing characteristics we liked. And we've spoken about how we would look at those MDU bulk contracts in the past, and that accounted for about 10% of the video losses for the quarter. So net-net I'm happy with where the ARPC was, but we'll do the right thing to drive EBITDA and cash flow in the business. And you won't always see probably ARPC continuing to rise like this.

Sheldon Bruha -- Chief Financial Officer

Okay. And just regard to some of the charges you had identified in the release that $28 million, about $13 million of this was associated with the transformation program, very consistent with the charges we had in Q3 and Q4 of $12 million, $11 million respectively. And then we also had separately $50 million of restructuring charges. You may have noticed our head counts in the quarter was down about 734 heads from year-end levels. Some of that was achieved through restructuring. Some of that was just not back to normal attrition in the organization. So that charge was related to head count reduction.

Operator

Our next question comes from Frank Louthan with Raymond James.

Frank Louthan -- Raymond James -- Analyst

Great, thank you. So you sold the towers in the quarter and focused on delevering. Are there any other assets that you have, either hidden assets or others that you would consider divesting? And then can you talk to us about the rate of penetration in the CAF II markets? How successful has that program been? And what are your intentions when they reauction that in the next year or two?

Daniel McCarthy -- CEO

Frank, you're absolutely right. We did close on the tower sales. We continue to look at all of the asset-based principally around some of the real estate holdings we have around the country. We have a portfolio and team trying to move through that. There are a number that we think that we can get to a transaction on whether it gets done in the next two quarters or more toward the end of the year or in the beginning of next year, it's really a function of some of the negotiations that go from that. As far as other assets, of course, we would look at asset dispositions and it was the right thing to do for the business both from a deleveraging perspective and really strategically. So we continue to look at that all the time but nothing really to report at this point.

And as far as rate penetration, you should think about a 30% penetration on the CAF households. We do like it. we think that there is more room to really drive that. We're experimenting with different channel techniques to go after that in different ways. And we are going to actively pursue participation in the CAF III or the digital program as the Chairman has started to coin it. We do think there's opportunities to work with the commission to do a better job versus targeting versus census blocks, and maybe targeting higher speeds and even existing areas that were upgrading with the previous CAF programs. But I think you'll see us actively participate with the industry and the industry groups, as well as look to participate in as robustly as we can on the CAF III.

Frank Louthan -- Raymond James -- Analyst

Any thoughts on why that penetrations remained so low? I mean given the by definition really lack of any available broadband you would have thought that the penetration would have been much higher than that. Any thoughts on why that is the case?

Daniel McCarthy -- CEO

I think it is higher in earlier. But from where our footprint has been, Frank, it tends to skew toward adding more and more customers or households later in the year and then we wind up in a place where we bring them on and available for sale probably six months, eight months later than it would have been ideal to do. But that's just the nature of having to serve some of these both from a construction perspective and even getting permits for certain parts of it. But we do still think we should be able to grow into that 50%, 60% penetration over time. It's just going to take a little bit longer than we originally thought.

Operator

Our next question comes from David Barden with Bank of America.

David Barden -- Bank of America -- Analyst

Hi, guys. Thanks for taking the questions. I guess just a couple. Just back on the CAF stuff, I noticed you guys kind of highlighted you're undertaking some fixed wireless broadband initiatives. I wonder if you could kind of scope that for us and share what that looks like. Second, I guess would be just an update on the permanent CFO search. And then I guess the last thing maybe Sheldon or Dan, just kind of as we think about that 2022 tower which is kind of the elephant in the room on the balance sheet, we've got probably 24 months of runway, maybe some would argue 18 months runway to get to somewhere where that '22 tower looks manageable, which means kind of reopening up the credit markets to the company. And I guess based on your conversations either with the rating agencies or with the bond investors kind of what does Frontier look like at that moment in time? Is it just flat? Is it close to flat? Is it -- perhaps you were saying maybe growing EBITDA at the margin? Like what does the Frontier look like that's able to access the credit market sometime in the next 18 to 24 months? Thanks.

Daniel McCarthy -- CEO

Okay. Dave, first on the first two, and I'll let Sheldon tackle the third one. On the first one, yes, we're using a variety of techniques for CAF II, everything from traditional copper approaches, selectively as you heard we're incorporating some fiber-to-the-home where we're building the infrastructure. And in many cases that's around some additional grants from various states whether that's in California and New York or one or two other states. But those products have been well received I would say. But the attributes could be certainly meets the minimum, but can be up to 100-meg throughput. So it's been good. We've been refining those designs and trying different approaches. And we'll continue to iterate on that as we go into the year.

As far as the CFO search goes we're hopefully reaching the end of that process. We have been very pleased with the roster of candidates that we've had the pleasure of meeting and reviewing for the role, and we hope to bring that to conclusion soon. Our list of criteria remains as we talked about in the past really experience in the public markets, experience with high-leverage situations and with capital-intensive businesses. So hopefully I'll be able to give you an update on that over the coming weeks and months.

Sheldon Bruha -- Chief Financial Officer

Just on your question on the 2022 tower. I mean, first, as we're thinking about it I mean in our capital structure activities in Q1 has created situation where we have significantly reduce the debt principal obligations we have through the end of 2021. So we pushed off approximately $400 million of bank amortization that we would normally have been due, which means we'll be able to earmark a lot of extra cash flows to whittling down that tower in advance of approaching that maturity. Beyond that as we've expressed before we're committed to raising our debt profile through a combination of debt paydowns through free cash flow, EBITDA growth particularly as well from our transformation initiatives, potential asset sales and ultimately capital markets transactions.

Operator

Our next question comes from Mike McCormack with Guggenheim Partners.

Mike McCormack -- Guggenheim Partners -- Analyst

Dan, maybe just a quick comment on what you're seeing in the Commercial market as far as the competitive and pricing situation goes. And then maybe if you can, I don't know if you can break it apart, but give us a sense for how much legacy revenue exposure is still in the commercial side of the business. And then maybe just one for Sheldon quickly on the secured capacity. Can you give us a sense for what's remaining on secured capacity? Thanks, guys.

Daniel McCarthy -- CEO

Sure. From the commercial side, Mike, I think first up on the wholesale carrier side. We are sort of kind of a stable quarter. We see customers that there is certainly maybe some hold waiting on what's going to come out of the FCC on a large merger. We also see some muted but small impact just from wind stream going through bankruptcy. So although that's really a smaller part. We continue to see customers on the wholesale side just following their end-user customer needs. And we continue to see some growth on the Ethernet circuits serving our tower customers. So it was a pretty benign, I'd say, quarter from a carrier perspective. Nothing really creating a lot of compression from a price perspective, and really nothing really causing big swings in that segment.

On the SMB-SME perspective, we still see a lot of competition. Probably the biggest headwind we have is just legacy voice declines that are occurring. And that's really both a substitution perspective from a technology as well as people doing grooming even on some of the legacy packages. We had, for instance, a large customer that was based in Texas just groomed down based on business and their business profile to book different technology as well as lower needs from a voice prospective. That's probably been the biggest I would say headwind that we've been dealing with. It hasn't been as much on some of the TDM or the sonnet kind of point-to-point circuits. Price is still our rationale. We haven't seen any significant change from that perspective as far as the different cable providers in the markets. So I would say it's been pretty pretty stable from last quarter from that perspective.

Sheldon Bruha -- Chief Financial Officer

And with regard to our secured debt capacity I'd say we don't comment on interpretations or on dentures or sort of on our basket calculation so...

Mike McCormack -- Guggenheim Partners -- Analyst

Sheldon, could you just then circle back maybe on your comment regarding balance sheet alternatives. You mentioned a couple of things in the call already. If you're thinking sort of beyond the asset sales are there other leverage you could pull on that?

Sheldon Bruha -- Chief Financial Officer

Look, I think our near term focus is maintaining our runway here and trying to -- and exploring. I think you would have seen what we did most recently in the quarters around sort of extending our first-lien liabilities. Beyond that I think we're going to further commentary around alternatives we're considering about next steps.

Operator

Our next question comes from Michael Rollins with Citi.

Michael Rollins -- Citi -- Analyst

Hi, good afternoon. I have two questions. The first if I go back you registered for some of the millimeter wave, I think at least one in the millimeter wave auctions but never put down a deposit to go forward. And I was curious if you can give us a little bit of insight into what were you thinking about in regards to millimeter wave? And how are you thinking about that now as the solution to extend broadband-to-the-home? Or is it possible competitor to your own fixed services in the home?

And then if I could switch gears and just ask a little bit about if you had strategic or conversations with financial buyers in the industry, what are they focused on in terms of what drives value or fixed-line asset? Is it fiber penetration? Is it mix of enterprise services? Maybe give us a little insight into how others in the industry are thinking about value for the assets that you have. Thanks.

Daniel McCarthy -- CEO

Yeah, Mike. This is Dan. I'm not sure I can really talk too much about the specifics on the auction because of the rules. But our view on millimeter was we were looking at whether or not it was a viable tool to put in the portfolio. But I can't really talk about the auction rules. We looked at it in different some test markets that we were trying to prove it out one way or another from a customer home pass perspective. I think I have to leave it at that. But as far as discussions with whether it's strategic or financial buyers, I think the key things people have historically I think looked for is fiber penetration to your point. I think enterprise and enterprise mix as far as growth rates and what the opportunity is on that and really demographics and whether or not those demographics are growing, shrinking, all of our markets, and I think anybody's market its very different. There's nobody who has a pure portfolio of growth assets. So those are the key things that people look at. Certainly I'm sure they look at from their own side as far as opportunity from a profitability perspective or synergy perspective, but I think those are probably the key things that they look at as far as trackers.

Operator

Our next question comes from Philip Cusick with J.P. Morgan.

Philip Cusick -- J.P. Morgan -- Analyst

Hey, guys. Thank you. A couple of follow-ups. First, can we dig into the Broadband improvements a little more. What promotions are working to help those copper improvements? And in the fiber side as well what kind of Broadband single-play or double-play offers are you out there with?

Daniel McCarthy -- CEO

Yes, so the real big improvement on the copper side came from more on the churn reduction. And when you look at that it's no single one point. As I pointed out before, we've had a number of different initiatives in the transformation efforts, as well as even before that that we're focused on everything from how a technician interacts with a customer to moving the copper legacy base into next-generation provision platforms that allow us to do a much better job from a troubleshooting perspective and integration into the features we developed around customer service for the FiOS markets. So there's a lot of that work. It was very complex. It was arduous. It continues. We're not completely there. I think we'll have a lot more of the base into those next-generation tools and troubleshooting techniques as we get through the second and third quarter.

But I was pretty happy since I've been trying to grab the copper to significant improvements for a while now. There was no really -- it wasn't really a significant change on acquisition or targets or pricing. That was fairly constant but it was really some channel improvement performance both internally and externally, as well as principally on the churn side. And then on the FiOS side we continued to see pretty good performance out of the price points that we had in market that were really $80 introductory lower at triple-play and double-plays were more like $75 and single play $50. So that's kind of been where we are. We vary sweeteners and offers that go in and out of the markets just like I think most of our competitors. But we've been pretty pleased with where we are right now on that.

Philip Cusick -- J.P. Morgan -- Analyst

That's great. And then second we've been through periods in the past when you've talked about sort of exiting run rate EBITDA savings. And I just want to clarify, so $200 million of run rate EBITDA benefit exiting 2019, can we interpret that to mean $50 million of benefit in the fourth quarter? Or is that sort of a last weeks or months exiting type of run rate? Thanks.

Daniel McCarthy -- CEO

Right now Phil we have a significant amount of efforts that are in scaling mode. Those scaling modes require us to schedule and coordinate, so I think you'll see a lot of the efforts that go into production, really are in more toward the back end of the fourth quarter just because there's so much going on, if we can pull it forward we will, but you should expect to see that benefit start to really build as we get into the latter part of the fourth quarter.

Philip Cusick -- J.P. Morgan -- Analyst

Okay. So you'll see some impact in the fourth quarter, but the real full run rate of that $50 million in the first quarter and maybe more than that by then?

Daniel McCarthy -- CEO

Yes, I think that's a good way of thinking about it.

Operator

Our next question comes from Simon Flannery with Morgan Stanley.

Simon Flannery -- Morgan Stanley -- Analyst

Great, thanks very much. Can you just talk about the CapEx trajectory for the year? Normally it's more back-end loaded, but you spent over $300 million in the quarter. So how should we think about that over the balance of the year and relative to your guidance? And on the copper, maybe you could update us a little bit more on where you are on the speeds tiers and what you think you need to get that to be competitive in some of the markets? How much do you have now at 25 or 50 or 100? Thank you.

Sheldon Bruha -- Chief Financial Officer

Yes, I'll start on the CapEx. I think our $300 million that we announced here for the first quarter largely in line with sort of an even phasing, slightly higher than even phasing of our guidance across the four quarters. Nothing in particular to highlight (inaudible) if you have about $10 million or so of extra CapEx in the quarter related to some of the California wildfires spending that we incurred. Beyond that I wouldn't necessarily say the profile that you mentioned from a historical context is right. You would see last year fourth quarter CapEx was the lowest spend that we had for the full year, which I don't think we give guidance on a quarterly basis around CapEx, but that profile wouldn't necessarily be right as you think it's on a regular basis.

Daniel McCarthy -- CEO

It's Dan. I think we have about a million homes at 100-meg level on copper. We have about six million homes above 25 megs. And we think that's a very robust set to go after especially in these markets where we're targeting some of the copper. I don't think you're going to see us do a lot of significant copper upgrades this year. Our big focus is really future-proofing kind of the CTF fiber markets. So we're spending the money to upgrade the entire market to the 10-gig capability. So where maybe others it would -- they'd have to do that in stages. By the end of the year we'll be at a point where we can offer 10 gigabit if we chose to ubiquitously throughout the CTF markets. But for commercial as well as 5G backhaul or any kind of backhaul for commercial opportunities, as well as potentially for consumers. So we think that's a good use of where we want to put our funds this year and we think that will earn us really good returns as we go forward in trying to change the game in the CTF markets.

Simon Flannery -- Morgan Stanley -- Analyst

Okay. So how much is on 10 gig now?

Daniel McCarthy -- CEO

That just started. You'll see it build throughout the year, but you'll see it conclude as we get into the end of the third quarter and into the fourth quarter.

Operator

At this time, I would like to turn the conference back over to Mr. Dan McCarthy for closing remarks.

Daniel McCarthy -- CEO

Thank you, operator. I'll leave you with the following thoughts and observations. Our first quarter results continue the progress we made in the fourth quarter. As we work toward our long-term goal of improving revenue and unit trends and realizing our transformation program targets, driving free cash flow and reducing leverage. While we recognize the challenges ahead, we are pleased with the achievements of our transformation program. And we intend to continue to make further headway in improving our financial profile over the course of 2019. Thank you all for joining us today and I look forward to updating you on our first quarter results.

Operator

Ladies and gentlemen, this concludes today's conference. We thank you for joining today's presentation and hope you have a nice day. You may now disconnect.

Duration: 28 minutes

Call participants:

Luke Szymczak -- Vice President of Investor Relations

Daniel McCarthy -- CEO

Sheldon Bruha -- Chief Financial Officer

Batya Levi -- UBS -- Analyst

Matthew Niknam -- Deutsche Bank -- Analyst

Frank Louthan -- Raymond James -- Analyst

David Barden -- Bank of America -- Analyst

Mike McCormack -- Guggenheim Partners -- Analyst

Michael Rollins -- Citi -- Analyst

Philip Cusick -- J.P. Morgan -- Analyst

Simon Flannery -- Morgan Stanley -- Analyst

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