Frontier Optimistic About April 1 Takeover of Verizon Systems, Cites new Video Push
Frontier Communications' planned April 1 takeover of some Verizon assets is going well, and it's undertaking a "strategically significant initiative" to expand multichannel video services, CEO Dan McCarthy said on a Q4 2015 investor call Tuesday. He said Frontier is…
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in the "final stages" of its plans for converting the Verizon wireline systems in California, Florida and Texas. "All indications are very positive with less than 40 days to the scheduled cutover," he said. McCarthy is optimistic Frontier will avoid the transition problems it experienced when it took over AT&T's systems in Connecticut for two main reasons: This time, Frontier is adopting all the Verizon bundles and products in the three states rather than trying to convert its local pricing and marketing to "Frontier-like" structures from the get-go; it also scheduled the customer "cutovers" to happen in phases rather than all in one day. Frontier believes the deal will create $600 million in cost-reduction "synergies" on day one. McCarthy said Frontier launched its new pay-TV campaign in Durham, North Carolina, as it plans to upgrade video capabilities in 3 million households in 40 markets over three to four years, extending its video service to about half of its existing 8.5 million households. The video expansion's cost is just $150 million and has "low capital intensity" due to compression technology that allows Frontier to allocate bandwidth efficiently. He said the company already is seeing market gains in Durham because it can now offer bundled products to apartment and condo complexes that previously were uninterested. He said the closing of the Verizon deal will improve the company's product mix, reducing the company's exposure to voice revenue declines. Frontier had Q4 broadband net adds of 28,530, and plans to connect or upgrade 100,000 households to broadband under the FCC Connect America Fund subsidy program in 2016, said a company presentation. Frontier Q4 revenue rose 6.2 percent to $1.41 billion from the year-ago quarter and operating income of $182 million was up 5.2 percent. It had a net loss of $103 million, as it incurred interest and integration costs related to the Verizon deal, versus a year-ago $14 million profit, said a company release. "Solid report from [Frontier] as results were in line across the board," Wells Fargo analyst Jennifer Fritzsche wrote investors. Frontier stock rose more than 12 percent to $5.08 at market close Tuesday.