3Q10 Earnings: Frontier Communications

Source: Frontier Press Release

Frontier Communications (NYSE:FTR) reported 3Q10 results on November 8, 2010.  "Our Verizon transaction is off to a strong start with customer metrics stabilized, over $60 million of synergies realized during the third quarter, and broadband expansion to thousands of new homes and businesses," said Maggie Wilderotter, chairman & ceo of FTR. "Frontier's local customer engagement and dedicated employees once again drove solid quarterly performance. We made an excellent start toward our target of 85% broadband coverage, and we are increasing our synergy estimate to $550 million, all while generating healthy free cash flow that safely covered our $0.75 annual dividend."

3Q10 Highlights:

• Revenue for 3Q10 was $1.4b as compared to $526m in 3Q09. Revenue of $890m is attributable to the acquired Verizon properties for the three months ended September 30, 2010.
• Operating income of $234m for 3Q10.
• Net income attributable to common shareholders of $29m, or $0.03 per share, as compared to $52m, or $0.17 per share, in 3Q09. 
• After excluding $78.5m for acquisition and integration costs, net income attributable to common shareholders for the 3Q10 would have been $78.1m, or $0.08 per share.
• Capital expenditures were $174.6m for 3Q10 and $330.3m for the first nine months of 2010, including $15.6m for 3Q10 and $77.9m for the first nine months of 2010 related to Verizon integration activities.
• Operating cash flow, as adjusted, was $671.5m for 3Q10 resulting in an operating cash flow margin of 47.9%. Operating cash flow, as reported, of $573.9m has been adjusted to exclude $78.5m of acquisition and integration costs, $12.1m of non-cash pension and other postretirement benefit costs, and $7.0m of severance and early retirement costs for 3Q10.
• Free cash flow was $339.1m for 3Q10 and $625.3m for the first nine months of 2010. The company's dividend represents a payout of 55% of free cash flow for the first nine months of 2010. 

 Connections as of September 30, 2010:

• At September 30, 2010, the company had 3.5m residential customers and 381,000 business customers.
• Total access lines reached 5.9m in 3Q10.
• The company had net reductions of approximately 5,000 high-speed Internet customers since July 1, 2010, including 3,200 net additions for Frontier Legacy operations less 8,200 net losses for the acquired Verizon properties, and had 1.7m high-speed Internet customers at September 30, 2010.
• The company had net additions of approximately 11,100 video customers since July 1, 2010 and had 515,600 video customers at September 30, 2010.
• Total company ARPU was $69.58 in 3Q10, up from $66.90 in 3Q09.

Guidance:

• For the full year of 2010, the company revised its previously reported expectations for capital expenditures and free cash flow, excluding acquisition/integration costs and capital expenditures, to be within a range of $500.0m to $525.0m and $830.0m to $860.0m, respectively.

President Obama Nominates Frontier's Maggie Wilderotter

Source: Frontier Press Release 

President Barack Obama announced his intent to appoint Maggie Wilderotter to vice chair, President’s National Security Telecommunications Advisory Committee.  Wilderotter is chairman and ceo of Frontier Communications (NYSE:FTR).

Frontier Announces Ohio Broadband Commitment And CapEx Plan

Source: Frontier Communications Press Release

Frontier Communications Corporation (NYSE:FTR) reiterated its broadband commitment to the state of Ohio, while also announcing highlights and status of several key initiatives.

During a business community luncheon at The Ohio State University at Marion, Frontier's Chairman and ceo Maggie Wilderotter highlighted Frontier's commitment to Ohio, focusing on broadband deployment, capital investment, service improvements and job retention/creation. These commitments were established when the Public Utilities Commission of Ohio (PUCO) approved Frontier's transaction with Verizon earlier this year. Mrs. Wilderotter was joined by Dr. E. Gordon Gee, President, The Ohio State University, who welcomed Frontier and the educational and economic opportunities afforded by future broadband expansion.

The highlights of Frontier's Ohio plan include:

-- By December 31, 2013, Frontier will take household broadband availability in its service areas to 85%; and

-- To accomplish this, Frontier will make capital investments of $50 million per year for each of the next three years. Furthermore, if broadband isn't available to 80% of the households within Frontier's service area by 2012, the agreement will be extended an additional year, i.e., Frontier will be required to invest an additional $50 million.

During her remarks, Mrs. Wilderotter announced the first round of investment. "Our local engineering and operations teams have been identifying locations for broadband deployment, with the first new areas scheduled to come on line starting the fourth quarter of this year. We'll be sharing the specific areas in the coming weeks. To accomplish the roll-out, we are already upgrading our physical plant and equipment and training employees so that we can bring high-speed Internet to the underserved and unserved in Ohio."

In addition to broadband expansion, Frontier committed to maintaining and/or improving service quality metrics throughout Ohio.

Mrs. Wilderotter also commented on job retention and growth. "We know that jobs matter. We are retaining the more than 1,000 employees here in Ohio. Recently, we announced the hiring of more than 30 positions including technical managers, technicians and splicers who will be supporting our network. These are well paying jobs that provide solid benefits in addition to a career path." Mrs. Wilderotter emphasized the company's commitment to a 100 percent U.S.-based workforce and stated that as part of the transaction, Frontier is bringing back to the United States 500 jobs outsourced to India by Verizon Communications (NYSE:VZ).

Frontier Provides Integration Update on Its Recently Closed Acquisition

Source: Frontier Press Release

Frontier Communications Corporation (NYSE:FTR) has announced a status update on its transition activities in 14 states acquired from Verizon Communications (NYSE:VZ) on July 1, 2010.

Thirteen states involved in the transaction are supported by a stand-alone system carved out from Verizon. The only state requiring conversion to Frontier systems at closing was West Virginia, where Frontier is now the largest provider of communications services. "The systems conversion in West Virginia has gone according to plan and on schedule," said Maggie Wilderotter, chairman and ceo of Frontier. "This week customers began receiving new Frontier-branded bills, which was a key milestone in the conversion process." The conversion team is also actively and methodically addressing the backlog of orders inherited from Verizon before the closing and orders that accumulated as with any system conversion. "All of our employees, and especially those in West Virginia, are going beyond the call of duty to help us execute this short-term conversion so that we can focus 100 percent on expanding broadband. This is especially true in West Virginia, which ranks 47^th in the nation for broadband availability. Its citizens deserve better and will get it from Frontier," said Mrs. Wilderotter.

The markets in the other 13 states that were part of the transaction represent 87 percent of the acquired lines. In these markets, the transfer of ownership has gone as expected and is on schedule.

Frontier Communications Elects Three New Board Members

Source: Frontier Press Release

Frontier Communications Corporation (NYSE:FTR), has announced the election of Edward Fraioli, Pamela D.A. Reeve and Mark Shapiro to its Board of Directors. These changes to the Board were required by the terms of the merger agreement between Frontier and Verizon Communications (NYSE:VZ), which include a provision that the Frontier Board, post-merger, consist of 12 directors, three to be initially designated by Verizon and nine by Frontier.

"The changes to Frontier's Board of Directors ensure the company will continue to benefit from a diversity of experience and opinions. Ed, Pam and Mark have proven leadership skills, broad management experience in established companies, and are truly independent thinkers familiar with challenging market conditions," said Maggie Wilderotter, Chairman and CEO of Frontier. "Together they add leadership, operational and financial expertise, as well as extensive corporate governance experience."

The new members of the Board of Directors are:

Edward D. Fraioli recently retired from Ernst & Young LLP, a public accounting firm, where he had been a partner since 1984. He served as Professional Practice Director for Ernst & Young's Private Equity practice since 2008, where he was responsible for support of engagement teams on accounting and auditing matters. From 2005 through 2008, Mr. Fraioli served as Ernst & Young's Global Vice Chairman for Independence matters within Global Quality and Risk Management, where he was responsible for the Ernst & Young's global independence organization. Prior to 2005, he served as lead audit partner on a number of public and global companies.

Pamela D. A. Reeve has been a director of American Tower Corporation since March 2002 and serves as the Lead Director and a member of the compensation and nominating and corporate governance committees of the American Tower board. From November 1989 to August 2004, she was the founder and a director of Lightbridge, Inc., a global provider of mobile business software and technology solutions, offering products and services for the wireless telecommunications industry, where she held various executive positions, including President and Chief Executive Officer. Ms. Reeve served on the board of directors of LiveWire Mobile, Inc. from 1997 until November 2009.

Mark Shapiro served as President, CEO and a director of Six Flags Entertainment Corporation (formerly Six Flags, Inc.), a theme park company, from December 2005 until May 2010. Prior to joining Six Flags, Mr. Shapiro spent 12 years at ESPN, Inc., where he served as Executive Vice President, Programming and Production and in various other capacities. Mr. Shapiro has been a director of Live Nation, Inc. since November 2008 and a trustee on the board of Equity Residential since January 2010.