Update 2/5/24 3:30 p.m. ET: After this story's publication, a Frontier spokesperson reached out to clarify Monday's press release formally announced a strategic review that's already ongoing and that it is not a new review.
Frontier Communications formally announced on Monday it's undertaking a strategic review of the company, exploring opportunities to “create additional value” for shareholders.
Frontier disclosed this development as it appointed Woody Young, former chairman of mergers and acquisitions at Perella Weinberg Partners, to its board of directors.
“Accordingly, the Board and management team are executing a formal and comprehensive review process of all opportunities to unlock shareholder value, including continued optimization of our operational and financing strategy, strategic partnerships, joint ventures, divestitures, mergers and business combinations,” Frontier said in a press release.
News of a strategic review doesn’t come as much of a surprise. Private equity firm Jana Partners wrote a letter to Frontier in December suggesting the company consider options such as selling itself, undertaking a joint venture or selling off some non-core assets.
Jana, along with an unnamed communications company, announced in October they have invested in Frontier.
According to Frontier, Young has “extensive experience” in telecom M&A. In addition to heading Perella Weinberg’s M&A unit, he also led the firm’s U.S. telecommunications and media advisory businesses.
Young has advised companies on notable telecom deals like AT&T’s acquisition of Time Warner in 2018 and Sprint’s merger with Nextel Communications in 2005.
“Woody brings decades of experience as an investment banker in the telecom industry, as well as deep operational and financial expertise,” stated John Stratton, Frontier’s executive chairman of the board. “We look forward to benefitting from Woody’s insight as we build the leading provider of fiber internet access in America and drive shareholder value.”
Analysts at New Street Research said Monday’s announcement is likely “formalizing inquiries that were mostly underway, and possibly accelerating some.”
New Street has argued it’s too soon for Frontier to consider selling itself. In a note to investors, the firm said Frontier is “barely halfway” through its plan to reach 10 million locations with fiber. However, that build will likely be “largely complete” by 2026.
“Running an auction would be a mistake now,” New Street analysts wrote. “But running a strategic review and adding a strong advisor to the board now makes lots of sense.”
They said the companies most likely to buy Frontier – AT&T, Verizon and T-Mobile – are aware there is “only one fiber asset in every market.”
“If one of them was forward thinking, they would strike preemptively rather than wait for an auction process in which their peers would compete,” said New Street analysts. “The Company and the board should be prepared for that.”
And by adding a “well-qualified” new member, Frontier’s board can decline deals from “opportunistic buyers that would undervalue the asset.”
Analysts at TD Cowen noted the strategic review puts several options on the table for Frontier, including accelerating its fiber-to-the-home build, a joint venture to go beyond the 10 million locations target as well as the opportunity to “aggressively participate in government funding” through the Broadband Equity, Access and Deployment (BEAD) program.
As for whether Frontier might sell itself, TD Cowen said the company “still needs to be valued properly as we consider the fiber in the ground and the fiber that has yet to be deployed.”
“We could see exciting news around expansion opportunities, but at this time don’t expect a sale of Frontier itself,” said TD Cowen analysts.