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Frontier Q3 revenue declines as it narrows its residential, business subscriber losses

Broadband, video services increase amidst landline voice losses
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Frontier Communications (Nasdaq: FTR) reported on Tuesday that Q3 2012 revenue was $1.252 billion, down from $1.258 billion from Q2 2012, a factor it attributes to a decline in residential and business customers and switched access revenue.

Consumer revenue declined to $531,397 from $535,089, while business revenue rose to $581,097 from $576,791 in Q2 2012.

As of the end of September, Frontier had a total of 2,932,200 residential customers and 291,400 business customers. It narrowed overall losses to 51,800 customers versus 65,700 customers in the three months ended June 30, 2012 and 72,600 customers in the three months ended March 31, 2012.

In addition, the telco raised its Average Revenue per Customer (ARPC) by $2.09, or 1.9 percent, over Q2 2012 and $3.61, or 3.3 percent, over Q1 2012.

Here's a breakdown of Frontier's key Q3 metrics:

  • Landline loss: As expected, Frontier lost over 129,581 traditional access lines, ending the quarter with over 4.9 million total lines. During the quarter, the telco had 3,025,928 residential access lines, down from 3,130,090 in Q2 2012, while reporting it had 1,916,594 business lines, down from 1,942, 013 lines in Q2.

  • Broadband services: Frontier added only 1,000 new broadband subscribers during the quarter. The telco said the low additions reflected the impact of lower customer activations as a result of fewer marketing promotions and final conversion clean-up. At the end of September, Frontier had a total of 1,782,300 broadband customers. Maggie Wilderotter, CEO and Chairman of Frontier said they "are well on track to meet our federal and state broadband expansion commitments, and we are excited about our new fourth quarter promotions and offers, including bundled satellite broadband service with Hughes, bundled mobile service with AT&T (NYSE: T), and an Apple (Nasdaq: AAPL) gift card promotion."

  • Video: Frontier's video-subscriber base continues to be hurt by ongoing FiOS-TV losses. Frontier added 27,300 satellite TV customers and lost 4,100 FiOS video customers during the quarter. Overall, the telco had 388,300 video customers at the end of September, which it said "reflects the curtailment of DirecTV (Nasdaq: DTV) billing as part of its bundled packages."

On the capex front, Frontier said that in Q3 it incurred $4.5 million in integration costs, down from about $28.6 million in Q2 2012 and $67.4 million in Q3 2011, related to its acquisition of Verizon's rural lines. Frontier completed the integration of the final nine Verizon systems onto its own platform in March 2012, and other ongoing network and operations integration work. The telco said that its integration costs and related capex will be completed by the end of 2012.

For the full year of 2012, Frontier has forecast capital expenditures and free cash flow, excluding integration costs and integration capital expenditures, to be between $750 million to $775 million and $900 million to $1 billion, respectively.

Frontier was trading at $4.49, down $0.15, or 3.34 percent in morning trading on the Nasdaq stock exchange.

For more:
- see the release

Special report: Wireline telecom earnings in the third quarter

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