07 Apr As bankruptcy looms, Frontier laments lack of fiber
As Frontier Communications charts a course to a bankruptcy filing next week, the company regrets not spending more on fiber network upgrades. In a regulatory filing on March 27, Frontier Communications outlined a restructuring plan that included filing for Chapter 11 bankruptcy on April 15. Frontier, which is saddled by a $17.5 billion debt load, also said its restructuring would include reducing its debt load by $11 billion.Earlier this year, it seemed as though Frontier would file for Chapter 11 in the middle of last month, but instead it chose to skip debt payments that were due March 15 and April 1.
In a presentation to investors, which was included in a Securities and Exchange Commission filing, Frontier said that a “significant under-investment” in fiber “created headwinds that the company is repositioning itself to reverse.”
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In its filing, Frontier said it’s considering new fiber build outs to about 3 million households by spending $1.4 billion through 2024. While most service providers have been adding broadband subscribers, Frontier has been bleeding out customers largely due to its legacy DSL infrastructure.
Frontier, which primarily competes against Charter Communications, said in its presentation that its internet service was available to 14 million homes, but 11 million of them were still on DSL while the remaining three million were fiber-based.
RELATED: Frontier’s CEO says company is on the rebound thanks to its fiber assets, better customer care
Last year, former Frontier Communications CEO and President Dan McCarthy touted his company’s fiber build out as one of the key pillars of Frontier’s turnaround efforts. It looks as though Frontier’s fiber efforts— the bulk of which was installed by Verizon prior to Frontier buying some wireline assets from Verizon—were too little, too late.
RELATED: Frontier CEO McCarthy steps down; Han named as new CEO and president
In December, McCarthy stepped down as Frontier Communications’ president and CEO, and left the company’s board of directors. Frontier’s board unanimously appointed Bernie Han as McCarthy’s successor across all three positions at the company. Han, who previously was CFO and COO at Dish Network, has led Frontier’s re-organization efforts by meeting with investors.
Some of Frontier’s problems can be traced back to its deals with Verizon and AT&T. Five years ago, Frontier bought Verizon’s wireline operations in California, Florida and Texas for $10.5 billion. In 2010, Frontier purchased Verizon’s rural wireline assets in 14 states for $6.8 billion. Later, Frontier purchased AT&T’s Connecticut wireline operations for $2 billion.
Close to 51% of Frontier’s revenue comes from residential subscribers while the rest is comprised of wholesale and business customers. Last year, Frontier lost 313,000 subscribers for an 8% decline in its internet customers.
RELATED: Preliminary 2019 results for Frontier Communications include net loss of $6B
Also in March, Frontier released preliminary results for last year, which it said could be subject to change. Among those results, total revenues for the year ended Dec. 31, 2019, came to $8.1 billion, which was down almost 6% compared to revenues of $8.6 billion in 2018. Frontier’s net loss last year ballooned to close to $6 billion compared to a loss of $750 million in 2018. Frontier’s earnings per share were a negative $56.80 compared to 2018’s -$8.37. Frontier’s stock opened at 24 cents per share Thursday morning.
Frontier said its consumer revenue was approximately $3.5 billion in 2019 versus $4.3 billion two years ago. Commercial revenue was $3.5 billion compared to $3.8 billion in 2018 while subsidy revenue declined from $383 million in 2018 to $369 million last year.
Frontier told investors in its presentation that it would “transform the business from a provider of legacy telecom services over a primarily copper-based network to a next-generation broadband-service provider with a long-lived fiber based infrastructure.”
In a move to shed some of its debt, Frontier Communications announced in May of last year that it was selling off assets and operations in Washington, Oregon, Idaho and Montana for $1.35 billion/ WaveDivision Capital, in partnership with Searchlight Capital Partners, bought Frontier’s assets in the four states and renamed them Ziply Fiber.