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Frontier Communications stock took a beating this afternoon after Citi analyst Michael Rollins downgraded the company’s stock from Neutral to Sell after announcing he didn’t believe Frontier’s rosy promises of synergy savings from its acquisition of Verizon’s wired networks in Florida, Texas, and California.
Rollins believes Frontier’s legacy copper networks, long overdue for significant upgrades, will continue to pose a greater-than-expected drag on Frontier’s financial performance, substantially reducing any benefits of its latest acquisition deal with Verizon. Frontier executives previously admitted they have less than a 25% market share in many of their service areas, evidence customers are dumping Frontier landlines and DSL broadband and never looking back.
Frontier was depending on the Verizon acquisition, scheduled to close March 31, to help stabilize its revenues and OIBDA numbers. That isn’t likely, according to Rollins, because Frontier customer revenue is down in all-copper service areas. Frontier’s revenues from its legacy service areas dropped more than 4 percent in 2015.
The news is slightly better in areas where Verizon has acquired fiber to the neighborhood (Connecticut) and fiber to the home (Pacific Northwest, Indiana) networks from AT&T and Verizon. Frontier FiOS has helped keep the company’s revenue stable to modestly down, but there are no clear signs Frontier plans to build its own fiber networks in its legacy service areas, outside of an experimental network in North Carolina.
As a result, Rollins is convinced the “synergy realization” numbers need to be run again. He predicts they will turn out much lower than anticipated. Experience with Frontier’s earlier acquisitions from AT&T and Verizon demonstrated lower than anticipated synergies.
And this bullish piece ran just yesterday: http://www.fiercetelecom.com/story/frontier-hopes-steal-business-market-share-cable-biz-sector/2016-03-08
I must say I don’t track Frontier closely but when I read:
“including Connecticut, and we see that as opportunity as well in California, Texas and Florida where proportionately cable companies had a greater share”
and
“We took share in 75 percent of our markets in 2015 and we think there’s a tremendous opportunity in California, Florida, and Texas to take share there in 2016 and 2017.”
Needless to say I was/am skeptical. Time will tell.
In Central Illinois urban markets that I follow, I suspect that their market share is under 25%. Cable competition is mostly Comcast and Mediacom. Other competition is iTV-3 and MTCO. Rarely see Frontier trucks in neighborhood or areas in this town and nearby Frontier towns. If people only have Mediacom or FTR to choose from, they are choosing Mediacom for the speeds and the internet. TV advertising emphasizes cheap internet “for life” for Business Customers at $59, and for residential customers at $19.95 for 2 years(6 Mbps DSL). DSL speeds have not improved since GTE was serving area. GTE sold… Read more »
There are 53 conditions in California alone as part of the purchase! Frontier has “enlisted” an army of help from hourly outside techs in WA and OR to assist the soon-to-be acquired outside techs in CA. with understanding Frontier’s Operational support systems, i.e. closing trouble reports/service orders and time reporting. Frontier claims to have learned lessons from the CT purchase where they gave back $10 million to consumers, underestimated call volumes due to the transition and overestimated the number of homes a technician could visit on any given day. Training is NOT something Frontier is very good with so, at… Read more »