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Verizon Deal Gives Frontier Opportunities in SMB Space

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SMB opportunity for Frontier with Verizon transaction assets

Earlier in this series, we looked at some aspects of Frontier Communications’ (FTR) acquisition of Verizon’s (VZ) wireline assets in California, Florida, and Texas. The deal was completed on April 1, 2016. Frontier plans to harness these assets for opportunities in the SMB (small and medium-sized business) space.

At the recent JPMorgan Global Technology, Media, and Telecom Conference, John M. Jureller, Frontier’s CFO (chief financial officer), said, “Our market share in SMB is probably about a third, probably about 32%, 33% of the businesses that are in those footprints is our Frontier customers. I think it’s fair to say in the CTF markets is the historical Verizon share has been less than that.” He also added, “Their focus has been, which has been really around the enterprise sized customer.”

Jureller also mentioned, “We hope to really be able to drive our penetration in the CTF markets in the SMB space to similar levels that we have on our legacy footprint.”

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Performance of Frontier’s business component in 1Q16

During 1Q16, Frontier’s business revenue declined ~1.6% YoY to reach ~$0.61 billion for the quarter. According to the company, the decrease in this stream was driven mostly by shrinking voice as well as wireless backhaul revenue.

On the positive front, revenue from the company’s SME (small and medium-sized enterprise) customers increased during the quarter. According to Frontier, growth in Ethernet revenue from both SME and carriers positively affected business revenue during the quarter.

For a diversified exposure to select US telecom companies, you can consider investing in the SPDR S&P 500 ETF (SPY). At the end of April 2016, SPY held a total of ~2.7% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT).

Next, let’s see what’s happening with Frontier in the Internet space.

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