Wednesday 25 October 2017 by FIIG Research Company factsheets

Frontier Communications July 2021 and September 2021 senior unsecured notes Factsheets

Frontier Communications July 2021 and September 2021 senior unsecured notes Factsheets

We have provided Factsheets for the following new DirectBonds from Frontier Communications:

Note: these bonds are available to wholesale clients only.

​Issuer overview

Frontier Communications Inc. (Frontier) is the fourth largest Incumbent Local Exchange Carrier (ILEC) in the US by revenue, after AT&T, Verizon and CenturyLink. The firm was originally established in 1935 as Citizens Utilities Company, and after various acquisitions became a diversified operator of public utilities, providing services for telecommunications, natural gas, electricity and water in the US. In 1999, the firm started to pursue the strategy of divesting the other utility operations to become a pure play telecoms provider. In 2000, the company was renamed Citizens Communications Company, providing wireline communications services to rural areas as well as small and medium sized cities and towns across the US, mainly as an ILEC. After acquiring Frontier Corp from Global Crossing Ltd in 2001, the company rebranded the ILEC operations to “Frontier”. In 2008, the company was renamed Frontier Communications Corporation.

Acquisitions of wireline and network assets from other US telecommunications companies have been a key feature of Frontier’s growth strategy. In 2010, Frontier acquired Verizon’s local exchanges and related business assets in 14 states for USD5.2bn. In 2014, the company bought AT&T’s fibre network and triple-play telecommunications services (known as U-verse) in Connecticut for USD2bn. Most recently in 2015, Frontier agreed to acquire Verizon’s wireline operations in California, Florida and Texas for USD10.5bn. The deal closed on 1 April 2016, and included the bundled telecommunications services (known as FiOS) provided over a fibre network in those states. Frontier has the right to use the FiOS brand and media guide for the next five years. These acquisitions have enabled Frontier to grow to a business of significant scale, operating in 29 states with over 5.5 million customers, including over 4.4 million broadband subscribers. The 2015/16 acquisition of assets from Verizon has been the most significant, adding over 2.2 million customers and has the potential to double Frontier’s revenues. The newly acquired Verizon and AT&T assets have lower capital intensity due to being younger network assets, but these assets also have lower revenue growth potential due to the already high penetration in the relevant markets.

Frontier provides a breakdown of revenue data by five business lines: voice (32% of total consolidated revenues in 1Q17), data and internet (42%), video (15%), switched access and subsidy (8%), and other (3%). Of note, video revenues increased dramatically after the latest Verizon acquisition due to the addition of FiOS video services, with over 1.1 million video subscribers at the end of 1Q17 as compared to around 550,000 as at year end FY15. Revenue split by customer type 49% residential, 42.2% business, and 8% regulatory (switched access and subsidy). As at 30 September 2016, around 30% of Frontier’s footprint is served by newer fibre networks, with the remaining 70% served by traditional DSL networks. The scale and reach of Frontier’s network coupled with targeted incremental investments (aimed at driving fibre deeper into the existing network) allow the potential for Frontier to evolve with the industry and maintain competitiveness versus incumbent cable companies.

Please refer to the Investment Memorandum (IM) and company website for full details on the company and transaction.