Frontier Communications (FTR) Q4 Loss Narrower Than Expected

Frontier Communications Corp. (NYSE:T) reported better-than-expected financial results in fourth-quarter 2017. The company’s adjusted net loss was narrower than the Zacks Consensus Estimate and revenues surpassed the same.

Net Income

Frontier Communications’ fourth-quarter 2017 net loss (on a GAAP basis) was $1,082 million or a loss of $13.91 per share compared with a net loss of $133 million or $1.73 in the prior-year quarter. However, quarterly adjusted (excluding special items) loss per share was 59 cents, narrower than the Zacks Consensus Estimate of a loss of $1.12.

Frontier Communications Corporation (NASDAQ:FTR) Price, Consensus and EPS Surprise

Frontier Communications Corporation Price, Consensus and EPS Surprise | Frontier Communications Corporation Quote

Revenue

Total revenues deteriorated 8% year over year to $2,217 million, outpacing the Zacks Consensus Estimate of $2,211 million. Segment wise, Customer revenues totaled $2,027 million, down 8.3% year over year, while Switched access and subsidy revenues were $190 million, down 4.5% year over year.

Within the Customer segment, voice services revenues totaled $687 million, down 11.2% year over year. Data and Internet services revenues were $939 million, down 7.3% year over year. Video revenues declined 15.1% to $310 million and Other revenues totaled $91 million, up 56.9% year over year.

Category wise, Consumer revenues were $1,086 million, down 9.2%. Commercial revenues totaled $941 million, down 7.2%. Switched access and subsidy revenues were $190 million, down 4.5% year over year.

Operating Metrics

Operating loss in fourth-quarter 2017 was $1,754 million against an operating income of $255 million in the prior-year quarter. Quarterly operating expenses were $3,971 million, up 84.4% year over year. This was primarily due to $2,078 million of non-cash goodwill impairment in the reported quarter. Quarterly adjusted EBITDA was $919 million compared with $976 in the prior-year quarter. However, adjusted EBITDA margin was 41.5% compared with 40.4% in the year-ago quarter.

Cash Flow

In the fourth quarter of 2017, Frontier Communications generated $665 million of cash from operations compared with $714 million in the prior-year quarter. Free cash flow in the reported quarter was $228 million compared with $316 million in the year-ago quarter.

Liquidity

Frontier Communications exited 2017 with $362 million of cash and cash equivalents compared with $522 million at the end of 2016. Total debt at the end of 2017 was $17,626 million compared with $17,923 million at the end of 2016. At the end of 2017, the debt-to-capitalization ratio was 0.88 compared with 0.62 at the end of 2016.

Subscriber Statistics

As of Dec 31, 2017, the number of consumer segment customers decreased 10.1% year over year to 4,397,000. The average monthly consumer revenues per customer were $81.61, up 1.6% year over year. Consumer segment customer monthly churn was 1.98% compared with 2.08% in the year-ago quarter. Commercial segment customers decreased 9.8% year over year to 453,000. Frontier Communications had 3,938,000 high-speed broadband subscribers, down 7.8% and 961,000 video customers, down 16.1% year over year.

Full-Year 2018 Outlook

For 2018, Frontier Communications expects operating free cash flow to be around $800 million. Capital expenditures will be in the range of $1,000-$1,150 million. Interest expense will be around $1.5 billion.

Recent Development

Frontier Communications competes with large telecom and cable TV operators such as AT&T Inc. (NYSE:T) and Charter Communications Inc. (NYSE:T) . The company acquired selected FiOS wireline assets from Verizon Communications Inc. (NYSE:VZ) . However, the company is yet to properly integrate those assets to derive maximum synergies.

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