Frontier Communications Executive Insights: Revenue Trends, CapEx

On Monday, Frontier Communications Corp Class B (NYSE:FTR) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-suite revealed.

Revenue Trends

Batya Levi – UBS: Would like to ask a question about revenue trends. You started to see some nice momentum in revenues, especially in the consumer market and with no real marketing in the quarter. Can you provide some color on how we should think about revenue trends, how did they track in April, may be for both consumer and business segments, and also how we should think about that continuing on into the second half. Do you expect the rate of decline to continue to improve from here on?

Donald R. Shassian – EVP and CFO: Batya, I’ll start. We do have a little bit of a cleanup coming from those conversions. I think a lot of initiatives that we are looking to be kicking in place right now with Dan and Maggie talk about, as we have talked to early – get all of our call center personnel working on all cylinders, and as we start to really be more effective with our marketing, we are expecting to see improvements. I think it will be more in the back end of the year, the second half, I think third quarter makes it a little bit lumpy, while we are continuing to see improvements and I expect churn to continue to improve, and then the growth adds, really to start take hold.

A Closer look: Frontier Earnings Cheat Sheet>>

Maggie Wilderotter – Chairman and CEO: The only thing that I would add is, I really think the acceleration, as we have talked about, will be in Q3 and Q4. Q2, we will continue to finish the cleanup from this first quarter conversion, and we do see stability continuing in the second quarter, so we don’t foresee any fallbacks on revenue. But when we look at the acceleration, we are really focused on really being aggressive in the marketplace in the third and the fourth quarter this year.

Batya Levi – UBS: The lumpiness in the third quarter, is that more related to the regulatory revenues?

Donald R. Shassian – EVP and CFO: Revenue lumpiness in the third quarter was more second quarter as we work through the systems conversions. We have got a number of products coming over, we are looking at different price points with those products coming over, trying to push customers on to a number of our digital phone products, and pushing it to a limited LD, and really realigning people’s data plans, to what really is needed for them. I think for the first and second quarter.

Maggie Wilderotter – Chairman and CEO: I think Don meant the second quarter Batya, and not the third quarter.

CapEx

Simon Flannery – Morgan Stanley: Don, could you talk a little bit more about CapEx? I think at one point you mentioned the weather as being the driver of Q1. Last quarter, you were very light. So can you just talk about the sizing through the rest of the year, is it going to be fairly level of where we also see a drop off in Q4, and perhaps you could just help us think about your view into ’13 now, you have talked about it coming down, has it come down sort of midway through ’13, at the end of ’13, and tie that into where we are on the broadband rollout?

Donald R. Shassian – EVP and CFO: I’ll start on CapEx Simon. We’ve got a lot of properties that are in cold weather portions of the country and the weather, as you know in the first quarter, was unusually warm, and so a lot of activities that we would have been kicking off in second and third quarter, we accelerated it, and we just really kept pushing to try to get the broadband build, expansion done, continue to improve speeds. I think it will be a little bit lower in the second and third quarter. I don’t think it’s going to drop off like it did last year in fourth quarter, I think it to be more at a level, but it will be a little bit less than we were in the first quarter. 2013, we’re still evaluating our plans in terms of what our expansion plans will be, or speed plans are. I think if there’s going to be any decline, it will be more at the back-end of the year, not the front-end of the year.

Simon Flannery – Morgan Stanley: Where are you in terms of number of homes passed with broadband now versus your targets?

Daniel McCarthy – President and COO: Simon, this is Dan. Our target was to really get – we are at 77% today. We are very comfortable that we’ll be able to hit our FCC requirements on that target.

Maggie Wilderotter – Chairman and CEO: There was somewhere around between 500,000 and 600,000 customers that we’ve built out Simon. So you’ll see us again in the next several quarters get very aggressive on penetration. I know in the slides we show, some of the penetration levels that we had in West Virginia, which are outstanding. I think a 23% conversion just in the build out areas. So you’ll start to see that in all of the new markets.

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