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Are Frontier’s Cost-Saving Initiatives Helping Its Earnings?

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Frontier’s earnings in 4Q17

Frontier (FTR) reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $919 million in 4Q17. While adjusted EBITDA improved sequentially, it declined 5.8% on a YoY (year-over-year) basis, from $976 million in 4Q16. Wall Street’s expectations for adjusted EBITDA were $0.93 billion in 4Q17.

However, its adjusted EBITDA margin increased every quarter in 2017, mainly driven by cost-saving initiatives.

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Frontier focusing on cutting costs

Frontier’s adjusted EBITDA margins have been growing on the back of an improving revenue trend and consistent cost-reduction efforts. Its focus on saving costs has helped it reduce its operating expenses and improve its profitability. In 4Q17, it continued its cost-cutting plan, which resulted in lowering its operating expenses by $39 million.

The company successfully achieved cost savings of more than $190 million at the end of 2017. It remains on track to meet its goal of $350 million in cost savings by the second quarter of 2018. It expects to continue focusing on cost savings throughout 2018.

In the telecommunications industry, Sprint (S) is also cutting down on costs to lower its expenses. In fiscal 3Q17, which ended in December 2017, it reported its highest adjusted EBITDA in the last 11 years. Its adjusted EBITDA grew 11% in fiscal 3Q17, while its adjusted EBITDA margin increased 720 basis points to 45.9%. Charter’s (CHTR) adjusted EBITDA grew marginally to $4 billion in 4Q17, while its adjusted EBITDA margin remained flat at 37.5% in 4Q17.

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