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Frontier Communications’ Major Long-Term Growth Drivers

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Part 7
Frontier Communications’ Major Long-Term Growth Drivers PART 7 OF 12

A Look at Frontier’s Capex and Free Cash Flow Plans in 2017

FTR’s capital expenditure

Frontier Communications (FTR) invests in ongoing capital expenditures, or capex, to improve its network. In 2Q17, Frontier Communications spent ~$0.26 billion on capex, down from $0.35 billion in 2Q16. The company has been investing its capex to enhance its network potential, extend Internet access availability, and boost its network speed.

In order to compete against cable firms like Charter Communications (CHTR) and Comcast (CMCSA), which gained the highest number of broadband customer additions in this space, speed superiority would play an important role for Frontier Communications.

A Look at Frontier’s Capex and Free Cash Flow Plans in 2017

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During the company’s recent 2Q17 earnings call, R. Perley McBride, Frontier Communications’ CFO, noted, “The Connect America Fund, or CAF II program, requires companies that accepted funds to deploy broadband to 40% of eligible locations by the end of 2017.

“We’re proud to report Frontier has reached that milestone in nine states and is on track to accomplish this requirement in the remaining states. Frontier now provides broadband to 238,000 households and small businesses in its CAF-eligible areas.”

Expected capex investments in 2017

In 2017, Frontier Communications’ management anticipates capital expenditures to be $1.1 billion–$1.2 billion. In comparison, Windstream (WIN) and CenturyLink (CTL) are expected to spend ~$0.84 billion and ~$2.6 billion, respectively, on capex in 2017.

In 2Q17, Frontier Communications reported adjusted free cash flow (or FCF) of $205.0 million, compared with $250.0 million in 2Q16. The company’s management anticipates adjusted FCF of $800.0 million–$900.0 million in 2017.

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