), a provider of telecommunication services to rural areas,
reported fourth quarter 2012 adjusted earnings per share of 6
cents, missing the Zacks Consensus Estimate by a penny. Comparing
year over year, the results decreased 14.3% from 7 cents.
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Quarterly revenue of $1,232.5 million failed to meet the Zacks
Consensus Estimate of $1,238.0 million and also dropped 3.9% from
the year-ago quarter. Lower customer revenue along with less of
switched access and subsidiary impacted the quarterly
On a year-over-year basis, local and long-distance service
revenues fell 8.5% to $542.5 million and data and Internet
services revenues fell 1.0% to $456.4 million. Other revenues
registered an improvement of 17.9% to $92.4 million.
For full-year 2012, Frontier posted earnings per share of 26
cents (beating both our projection and last year's figure by a
penny), on revenues of $5,011.9 million (down 4.4% year over
Adjusted operating income in the fourth quarter dropped 1.8% year
over year to $270.3 million. Operating margin was 21.9% compared
with 21.4% in the year-ago period.
At the end of 2012, the number of residential customers was
2,887,063, while business subscribers totaled 286,106. Customer
churn was 1.62% versus 1.69% in 2011.
Frontier added approximately 5,300 broadband users in the fourth
quarter to reach 1,787,561 (up 1.3% year over year). While the
company added 20,900 satellite TV customers, it lost 2,800 FiOS
video customers. As of December 31, 2012, video subscribers
Frontier exited 2012 with $1,326.5 million of cash and cash
equivalents compared with $326.1 million at year-end 2011.
Long-term debt increased to $8,381.9 million at the end of the
year from $8,224.4 billion at the end of 2011.
In 2012, the company incurred capital expenditure of $748.4
million for business operation, almost the same as last year.
Free cash flow was $975.3 million against $1,121.5 million a year
The company paid a total of $399.4 million in dividend in 2012,
equal to a dividend payout of 41% of free cash flow compared with
dividend payments of $746.4 million, which was equal to a
dividend payout of 67% in the prior year.
For 2013, Frontier guides capital expenditures and free cash flow
in the bands of $625-$675 million and $825-$925 million,
respectively. The company also expects cash taxes expense in the
range of $125-$150 million.
We are optimistic about several initiatives taken by Frontier to
reduce its revenue losses. The enhancement of broadband
deployments to rural areas and the conversion of
) lines would lead to higher profits and free cash flows.
Apart from new product deployments, broadband expansion and cash
flow management, the company is collaborating with other firms to
offer differentiated products to complement customer
requirements. These actions will provide a competitive advantage
to Frontier's performance over other industry players such as
Consolidated Communications Holdings Inc.
Frontier currently carries a Zacks Rank #4 (Sell).