Frontier's rating cut by S&P due to increasing competition
The ongoing competitive effect of cable telephony and wireless substitution has driven Standard & Poor's Ratings Services to cut Frontier Communications' (Nasdaq: FTR) rating for corporate credit and senior unsecured debt to double-B-minus, three levels below investment grade.
The downgrade comes as Frontier just announced some progress in paying down debt, saying earlier this week that it had paid back almost $503 million in senior notes that had come due Jan. 15.
Frontier continues to move beyond the initial operational integration challenges that came with the company's 2010 acquisition of former Verizon properties, having said in its most recent earnings report last November that integration cost obligations had fallen sharply from previous quarters. However, its financial performance has been limited by increasing competition, S&P said. That third quarter earnings report in November featured growing profit, but a decline in revenue. Thus, the ratings agency moved Frontier's rating from double-B to double B-minus.
S&P said Frontier will face the same challenges in the next few years, though the telco could get its rating raised if it can stoke improvements in access lines and revenue from data services.
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