Understanding Frontier’s Scale of Operations after the Verizon Transaction



Frontier after the Verizon transaction

Referring to Verizon Communications’ (VZ) transaction with Frontier Communications’ (FTR), Frontier Chief Executive Officer and President Daniel J. McCarthy explained that “this is a transformative acquisition for Frontier that delivers first-rate assets and important new opportunities given our dramatically expanded scale.”

McCarthy added that the deal “significantly expands our presence in three high-growth, high-density states, and improves our revenue mix by increasing the percentage of our revenues coming from segments with the most promising growth potential.”

Understanding Frontier's Scale of Operations after the Verizon Transaction

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Frontier’s scale after the Verizon transaction

According to the consensus of Wall Street analysts, Frontier’s revenue in 1Q16 is expected to be ~$1.4 billion. In 2Q16, the wireline telecom company’s revenue (including the performance of assets in the Verizon transaction) is projected to be ~$2.7 billion, according to the consensus of these analysts. Note that we mentioned earlier in this series that the Verizon transaction was completed on April 1, 2016.

Notably, a spate of transactions has significantly transformed Frontier’s revenue-mix. Earlier in October 2014, Frontier acquired the Connecticut wireline assets of AT&T (T), according to the company.

Revenue contributions

Video and residential data revenues represented ~15% and ~19%, respectively, Frontier’s revenues in 2014, according to the company. However, according to the actual 2014 results of Frontier, the contribution by video and residential data revenues represented ~2% and ~15%, respectively, of total revenues.

For a diversified exposure to select telecom companies in the US, you may consider investing in the SPDR S&P 500 ETF (SPY). SPY held a total of ~2.8% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT) at the end of March 2016.

In the next part, we’ll take a look at the latest from T-Mobile.


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