Frontier's Q1 revenue rises 29 percent, but it takes hit on legacy operations

Frontier (NYSE: FTR) continues to see its acquisition of Verizon's (NYSE: VZ) rural lines pay off as Q1 revenue rose 29 percent to $1.34 billion from Q1 2010.

However, the service provider's revenue rise was slightly offset from a $14.9 million decline in its legacy operations. This caused Frontier to slightly miss analyst forecasts of 6 cents on $1.35 billion in revenue.

As of the end of March, Frontier had 3.3 million residential customers and 333,400 business customers.

Here is a breakdown of key company metrics:

  • Landline Losses: As expected, Frontier's landline voice lines declined from about 5.7 million in Q4 2010 to 5.6 million in Q1 2011. Within its landline voice business, local and long distance services voice service revenue overall declined from $662,099 to $635,114.
  • Broadband Services: Broadband continues to be a growth driver at Frontier, gaining about 10,500 new DSL customers in Q1 2011, bringing it to a total of 1.7 million by the end of March. As part of its ongoing DSL deployment drive, Frontier made an additional 83,000 homes broadband capable.
  • Video Services: In Q1 2011, Frontier added about 15,000 new video customers, ending the period with 546,400 video customers in total on its FiOS TV and satellite offerings.
  • Business Services: Driven by traditional voice and emerging data services including Ethernet over Copper and fiber-based Ethernet, Frontier's business revenue rose from $591,380 to $603,797 in Q1 2011.

By acquiring Verizon's rural lines, Frontier instantly tripled its size with 4.8 million rural phone lines, which were largely abandoned by Verizon over the years, and 11,000 employees.

The challenge now is to continue to find ways to stem ongoing losses to savvy cable companies that are anxious to serve these customers with their own triple play bundle offerings, especially in its Oregon region where it appears to be trying to opt out of its FiOS video franchise.

For more:
- see the release

Earnings summary: Wireline in the first quarter of 2011

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