Frontier Communications (NYSE: FTR) appears to ahead of schedule with integrating Verizon's rural lines.
While the integration of the Verizon's (NYSE: VZ) rural lines in 14 states is clearly a daunting task given its size, Maggie Wilderotter, CEO and chairwoman of Frontier Communications, speaking during the Goldman Sachs 20th Annual Communacopia Conference, outlined the service provider's integration and new service strategy.
In the coming weeks, Frontier said it will convert the first four of 13 systems it acquired from Verizon onto their operating systems.
"Upon completing this conversion, we will use it as a blueprint to apply to the remaining states in the first half of 2012," Wilderotter said. "This is accelerated from our original plan of the end of 2012."
Wilderotter estimates that when the final state is converted onto its system, Frontier will save over $100 million in yearly cash expenses.
"This cost reduction will keep us on track to $600 million in annual synergies by the end of 2012, which is $100 million higher than our original estimates," she said.
Of course, cost reduction is only one element of Frontier's overall goals. As it completes its integration duties to reduce costs, Frontier continues to ramp up its broadband, business and wholesale capabilities to increase its revenues.
Although Frontier said it will see some near term revenue setbacks specifically in New York and Pennsylvania as a result of Hurricane Irene and Tropical Storm Lee. In addition, its four-state conversion could impact sales for about 30 days.
Despite these issues, Wilderotter said it plans to stay on track with its plans to stay within its "capital expenditure guidance to expand broadband, fix congestion and meet wireless backhaul enhancements," Wilderotter said.
Frontier's revenue drive is centered on a few key fundamental areas: expanding the availability and penetration of broadband services, reducing access line loss, delivering new products and offering dual and triple play service bundles.
At the end of Q2 2011, Frontier expanded broadband to 466,000 new homes since July 2010 with plans to reach 1 million homes when it finished its broadband build out in 2013.
"Our current average penetration levels West Va. is 15 percent," Wilderotter said. "Our program to address to high speed penetration is just starting in third quarter and will continue throughout the fourth quarter."
In addition to consumer services, Frontier is expanding the availability of business services, which represents half of its customer revenue.
To make good on the business promise, Frontier is beefing up its sales force and is offering new services, including fiber and copper-based Ethernet that are being sold through local sales representatives.
"Our commercial sales teams are focused on developing and maintaining and predictable pipeline of new revenue and that's how they are compensated," Wilderotter said.
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