Has Frontier’s Cost-Reduction Program Been Successful?



Frontier’s EBITDA trend

Frontier (FTR) reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $908 million in Q1 2018. Adjusted EBITDA exceeded the Wall Street analyst expectations of $900 million. However, adjusted EBITDA numbers fell from both the year-ago quarter and the sequential quarter due to high seasonal costs. Adjusted EBITDA fell ~2.9% year-over-year (or YoY) from $935 million in Q1 2017 and ~1.2% from $919 million in Q4 2017. Moreover, Frontier anticipates adjusted EBITDA in 2018 will come in at approximately $3.6 billion.

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Frontier focuses on cutting costs

Frontier’s adjusted EBITDA margin was 41.3% in Q1 2018, up from 39.7% in Q1 2017. The main reason for this increase in the adjusted EBITDA margin was continued cost savings initiatives. Frontier’s focus on cost savings has helped the company to reduce its operating expenses and improve its profitability.

The company successfully achieved cost savings of about $275 million at the end of Q1 2018. Furthermore, the telecom company remains on track to meet its goal of $350 million in cost savings by the end of Q2 2018.

Peer comparison

In comparison, in Q1 2018, integrated US telecom behemoth Verizon (VZ) reported a consolidated adjusted EBITDA margin of 37.1%. Meanwhile, AT&T’s (T) combined domestic wireless operations EBITDA margin was 41.8% in Q1 2018. Additionally, Windstream’s (WIN) adjusted OIBDA (operating income before depreciation and amortization) margin was 23.1% in Q1 2018.

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