Frontier Communications (NYSE: FTR) felt the sting of its Verizon landline acquisition in Q3 as it incurred $78.5 million in costs related to its acquisition of the RBOC's rural landline operations in 14 states.
Although the Verizon deal did help drive up Frontier's revenue, profits fell short of analyst's forecasts.
During the quarter, Frontier reported a profit of $29 million, down from $52.2 million, or 17 cents a share, in Q3 2009. A Thomson Reuters poll of financial analysts forecast earnings of 10 cents on $1.41 billion in revenue.
On the brighter side, Frontier's revenue jumped to $1.4 billion. Frontier attributes $890.1 million in revenue to the properties it acquired from Verizon.
"Our Verizon transaction is off to a strong start with customer metrics stabilized, over $60 million of synergies realized during the third quarter, and broadband expansion to thousands of new homes and businesses," said Maggie Wilderotter, Chairman & CEO of Frontier Communications in the company earnings release.
Wilderotter added that "Frontier's local customer engagement and dedicated employees once again drove solid quarterly performance. We made an excellent start toward our target of 85% broadband coverage, and we are increasing our synergy estimate to $550 million, all while generating healthy free cash flow that safely covered our $0.75 annual dividend."
Here's a breakdown of key metrics:
- Wireline Voice: As of the end of Q3, Frontier had over 5.8 million voice lines, including 3.7 residential and 2.1 million business lines.
- Broadband Subscribers: During the third quarter, Frontier lost about 5,000 DSL customers, a figure that includes 3,200 net additions for Frontier Legacy operations less 8,200 net losses for the acquired Verizon properties. In total, had over 1.6 million high-speed internet customers at September 30, 2010.
- Video Subscribers: Video also was up in Q3 with the addition of about 11,000 new subscribers since July. As of the end of September, Frontier had 515,600 video customers.
Excluding the Verizon acquisition/integration costs and capex, Frontier revised its capex and free cash flow for the full year of 2010 to be between $500 million to $525 million and $830.0 million to $860.0 million, respectively.
- see the earnings release
- Dow Jones Newswires has this article
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Maggie Wilderotter, CEO and Chairman, Frontier Communications -- 2010 Top Women in Wireline
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