Frontier Communications Corporation (NASDAQ: FTR) has reported its first quarter 2017 results, and announced that the board of directors has revised the Company´s capital allocation strategy, which includes a reduction in the quarterly dividend to USD 0.04 per share, to enhance financial flexibility and achieve a targeted leverage ratio2 of 3.5x by year-end 2021, down from the current ratio of 4.39x, the company sdaid.
Dan McCarthy, President and CEO, stated, “During the quarter, we continued to realize our targeted efficiencies and synergies, and I am also pleased to have achieved our third consecutive quarter of improved FiOS gross additions in the California, Texas and Florida (CTF) markets. We are executing on a number of initiatives with the goal of enhancing customer experience, reducing churn, stabilizing revenues and generating cash flow.
Frontier achieved a third consecutive quarter of growth in broadband gross additions in its CTF markets, which was driven by the first full quarter of robust marketing.
Frontier achieved its previously announced target of annualized cost synergies of USD 1.25bn as of the end of the first quarter and remains on track to achieve an incremental USD 350m in annual savings by mid-year 2018.
The board has reduced the quarterly common stock dividend from USD 0.105 to USD 0.04 per share, beginning with the dividend payable on June 30, 2017 to shareholders of record on June 15, 2017.
This change allows for reallocation of approximately USD 300m annually, increasing to approximately USD 400m annually in the second half of 2018 following the conversion of the mandatory convertible Series A Preferred Stock to common stock. Frontier plans to use these proceeds primarily to repay debt, with the goal of lowering the leverage ratio from 4.39x to 4.0x by the end of 2019, and 3.5x by the end of 2021.
Revenues for the first quarter were USD 2,356m, compared to USD 2,409m in the fourth quarter of 2016. Approximately USD 11m of the sequential decline in revenue was a result of the previously disclosed cleanups of CTF accounts that were determined to be non-paying following an intensified effort to address overdue accounts.
The cleanup associated with those overdue accounts has now been completed. As previously disclosed, first-quarter revenue and customer trends in Legacy operations reflect a one-time impact from the automation of processes to address non-paying customers, which accelerated deactivations. This process is now complete, and we estimate the impact resulted in a one-time reduction in customers of 18,000 which impacted Legacy revenues by USD 5m.
Frontier´s total operating expenses in the first quarter of 2017 were USD 2,085m, a 3.2% decrease from USD 2,154m in the fourth quarter of 2016. Frontier reduced adjusted operating expenses6 in the first quarter by USD 10m, to USD 1,433m from the fourth quarter of 2016. Integration expenses for the first quarter were USD 2m, down from USD 49m in the fourth quarter of 2016
Frontier Communications provides communications services to urban, suburban, and rural communities in 29 states. Frontier offers a variety of services to residential customers over its fiber-optic and copper networks, including video, high-speed internet, advanced voice, and Frontier Secure digital protection solutions. Frontier Business Edge offers communications solutions to small, medium, and enterprise businesses.