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Frontier Communications Is A Good Play

May 19, 2014 | About:

Frontier Communications (NASDAQ:FTR) delivered a record broadband net adds in the past quarter. Frontier is a communications company that provides regulated and unregulated services to customers in the United States. The company provides data and internet services. It also delivers commercial services such as Ethernet, dedicated Internet, switching, and data transport services. The company had about three million residential customers as of Dec 31, 2013.

Numbers at a Glance
Frontier also provides satellite and terrestrial video services. In the first quarter, it recorded earnings per share of $0.04 compared to earnings of $0.05 in the first quarter of 2013. However, earnings are $0.05 when adjusted for pension settlement and other expenses. Frontier's revenue for the quarter is $1.15 billion, a sequential decline of $26.3 million. Despite this, data and Internet services revenues increased by 1.5% over the figure for the same period in the year prior.

Positive Outlook
For the full-year 2014, Frontier expects its free cash flow to fall in a range of $725 million to $775 million. Though it anticipates spending of $225 million to $275 million on integrated activities of its Connecticut acquisition, Frontier expects that its cash generation will be bolstered with the addition of a cash flow from the business.

On May 1, 2013, the company increased the price of its Simply Broadband product from $29.99 to $34.99 to better reflect the value of its offering. Another incremental revenue opportunity came in April from the completion of network speed enhancements in many of Frontier's markets. The company introduced Anywhere Hosted Business Telephone System in the first quarter of 2013. These initiatives will help to boost earnings in the coming quarters.

Head to Head
Frontier faces a stiff competition from AT&T (NYSE:T), CenturyLink (NYSE:CTL), and Fairpoint Communications (FRP). Compared to its peers, Frontier has a diversification advantage as it provides services and delivers a range of third-party communications equipment to customers.

Wings into the Future
Frontier is a large company with an approximate 385,400 video subscribers. It has around 1.9 million broadband subscribers and 270,000 business customers. The company has many plans to boost its revenue in the future.

A New Product Line
In the second quarter, Frontier will be adding a new product line to its Frontier Secure Platform in its Internet of Things segment. The first solution that will be launched is Dropcam.

The Connecticut Business
Frontier is making a good progress with its Connecticut acquisition. The target date for closing the transaction is in the quarter four of this year. Frontier believes that the acquisition will create a shareholder value.

On a Concluding Note
Frontier is diversified across the major segments of the technological sector and therefore is well-positioned to meet changes in the industry. Other advantages are its sustained dividend payments.

Overall, Frontier has a stable financial position. It has an ample room to grow its line of business. It has planned several initiatives that it expects will improve its revenue performance in the second quarter. Therefore, it can be said that this company will continue to provide returns to investors in the near future.

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GuruFocus has detected 6 Warning Signs with Frontier Communications Corp $FTR.
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