On Dec 24, we maintained our Neutral recommendation on
Frontier Communications Inc.
). We believe new product deployments, broadband expansion and
cash flow management by reducing operating expenses would remain
accretive to the company's growth. However, backhaul revenue
pressure, increased cost on initiatives, competitive threats in
the telecommunication market, as well as higher financial
leverage would continue to weigh on the company's earnings. This
communications company holds a Zacks Rank #3 (Hold).
The company continues to offer bundled services, which include
High-Speed Internet (HSI), unlimited long distance calling,
enhanced telephony features, and video offerings along with
attractive packages of value-added services to local access line
customers. The recent rise in cable tariffs has made Frontier's
service even more competitive. Frontier remains focused on new
product development including Hughes Satellite Broadband,
Residential VoIP and Commercial Data Products.
Meanwhile, the company expects the backhaul transformation to
be completed in the first half of 2014 and provide a stable
revenue stream. Further, the company has made significant
development in its Ethernet to wireless tower builds and expects
it to be completed in the fourth quarter. The company now intends
to add capacity to its high end Ethernet services, which will
allow it to charge higher prices and in turn boost revenues.
However, loss of legacy fixed telephony business to wireless
and other offerings continue to affect the company. The company's
local and long distance service revenues dropped during the
quarter as more users migrated from the traditional landline
service. Expected decline in wireless backhaul revenues during
the first half of 2014 is another near-term concern for
For 2013, the company is expected to see higher operating
expenses related to increase in employee cost and expenses
associated with product launches, which could affect margins.
Frontier is also considerably challenged by slow economic
recovery in its service territories, which impedes growth
Companies operating within the telecommunication sector that
are worth taking note of include
Hawaiian Telcom Holdco Inc.
Chungwa Telecom Company Limited
Consolidated Communications Holdings Inc.
). HCOM carries a Zacks Rank #1 (Strong Buy), while CHT and CNSL
stocks currently carry a Zacks Rank #2 (Buy).
CHUNGHWA TELECM (CHT): Free Stock Analysis
CONSOL COMM IL (CNSL): Free Stock Analysis
FRONTIER COMMUN (FTR): Free Stock Analysis
HAWAIIAN TELCOM (HCOM): Free Stock Analysis
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