Frontier Communication was able to pare down in its net loss in the third quarter, but its revenues dropped year over year.
From the glass-is-half-full perspective, Frontier racked up a net loss of $345 million, a loss of $3.31 per share, compared to a loss of $426 million ($4.11 per share) in the same quarter a year ago.
Frontier executives said on the Tuesday earnings call that the losses were primarily due to goodwill impairment charges of $276 million, as well as an additional $30 million loss on the previously announced sale of operations in Washington, Oregon, Idaho and Montana.
To shed some of its debt, Frontier Communications announced in May that it was selling off assets and operations in Washington, Oregon, Idaho and Montana for $1.35 billion. WaveDivision Capital, in partnership with Searchlight Capital Partners, is buying Frontier's assets in the four states in a deal Frontier CEO Dan McCarthy said is scheduled to close in the second quarter of next year.
Frontier CFO Sheldon Bruha said on the earnings conference call that the $30 million loss in the four states was "largely attributed to the business as usual capex for the four states during the period and the lack of any associated depreciation in the period given their designation as assets held for sale," according to a transcript by Seeking Alpha.
Frontier's quarterly revenues were $1,997 million, which was down 3.4% sequentially, compared to $2,126 million in the same quarter a year ago. The consensus estimate from analysts was $2,015 million. Frontier's operating income was $26 million against an operating loss of $33 million recorded in the prior-year quarter.
The consumer and commercial divisions of Frontier weighted on the revenue losses. Revenues from the consumer segment declined to $1,096 million from $2,031 million. Frontier CEO Dan McCarthy said on the earnings call that consumer segment revenue decline was primarily driven by customer losses.
McCarthy said the increase in consumer customer churn to 2.24%, which was up from 2.14% sequentially and 2.03% year-over-year, was partially due to seasonal slowdowns from the second quarter to the third quarter.
Frontier lost 71,000 broadband subscribers in the quarter while McCarthy said Frontier had a sequential improvement in the third quarter with 1,000 fiber losses.
"Fiber broadband gross additions increased sequentially in the third quarter and we also had a slight sequential improvement in fiber broadband churn," McCarthy said. "With the completion of the upgrades of the fiber network to be 10 gigabit capable, we have increased our emphasis on selling at higher speed tiers. As a result of the 500 megabits offering that I discussed in our second quarter call, over half of the fiber broadband gross additions in Q3 were at speeds in excess of 250 megabits.
"In contrast, the majority of the fiber gross additions in the third quarter of 2018 were in the 100 to 250 megabits range. And with the completion of our network upgrade, we are also seeing an increasing number of existing fiber customers moving to higher speeds."
In the current fourth quarter, McCarthy said Frontier has started a promotion for it 500 Mbps service with the ability to upgrade to gigabit broadband speeds.
"As a result, we anticipate further upward speed migrations in the fiber base of customers," McCarthy said.
According to Bruha, Frontier is building fiber-to-the-home in certain rural markets to a total of 19,000 locations using state funding programs, and is on track to build fiber to more than 30,000 greenfield locations this year as the normal ongoing elements of the company's capital spend.
Going forward, Frontier expects to benefit from 5G backhaul on its fiber network and increased uptake on its SD-WAN services.
Frontier's commercial revenues totaled $882 million, which was down from $962 million, due to declines in wholesale revenues, legacy data products, Ethernet and voice services.
As it did in the second quarter earnings call, Frontier didn't take questions during its third quarter earnings call, nor did it provide very much guidance going forward.
Bruha said Frontier's board of directors continues to evaluate Frontier’s capital structure, which includes "considering, evaluating and negotiating capital markets, financing transactions and other strategic alternatives."
Frontier's shares dropped 5% to just above 87 cents per share during mid-morning trading on Wednesday.