Frontier’s adjusted EBITDA trend
Frontier (FTR) posted an increase in adjusted EBITDA on a sequential basis in the fourth quarter of 2018 after delivering soft sequential EBITDA growth for the past three quarters. Adjusted EBITDA was $895 million in the fourth quarter, which declined 2.6% from the year-ago quarter but grew 1.9% from the preceding quarter. For 2019, Frontier anticipates adjusted EBITDA in the range of $3.45 billion to $3.55 billion, down from $3.565 billion reported in 2018.
The company’s adjusted EBITDA margin of 42.1% in the fourth quarter improved on a sequential as well as on a YoY basis. The EBITDA margin was 41.5% in Q4 2017, while it was 41.3% in Q3 2018. The company has been posting adjusted EBITDA margins of above 40% for the past six straight quarters.
During the fourth quarter, the company substantially expanded the transformation initiatives it announced last year. The efforts include revenue enhancements, operational enhancements, customer care, and technical support, which are expected to enhance sales, improve customer satisfaction while reducing costs.
Frontier is planning to continue to execute these initiatives in 2019 and 2020. The company plans to target a $500 million EBITDA benefit by the end in its next phase of transformation initiatives.
In the telecom industry, Sprint (S), the fourth-largest wireless company of the US, has also eliminated more than $1 billion in costs in each of the past four straight years and plans to continue to reduce expenses for fiscal 2018 as well. The company plans to reinvest in the Next-Gen Network, digital capabilities, and other initiatives.
Sprint is awaiting merger approval with rival T-Mobile (TMUS), which may not only boost its adjusted EBITDA but could present competition to the dominant players Verizon (VZ) and AT&T (T) in the telecom industry along with enhancing the scale and generating cost synergies.