Frontier to refresh its FiOS platform, expand FTTH footprint after Verizon deal closes

Frontier Communications plans to revamp its FiOS platform and expand the FTTH network in the three markets it will enter once its pending acquisition of Verizon's (NYSE: VZ) wireline assets takes place.

Speaking to investors during the second-quarter 2015 call, Dan McCarthy, CEO of Frontier, said the Verizon asset acquisition will give it an even larger FiOS serving area.

"We will gain a substantially enlarged FiOS footprint and much greater scale," McCarthy said. "This transaction increases Frontier's growth profile and reduces our exposure to declining portions of our business, improving our business mix significantly."

McCarthy added that it will also implement new FiOS technology across all of its existing markets where it offers the FTTH service today.

"Another benefit of this transaction is the technology refresh that we will enjoy for our FiOS markets," McCarthy said "We are currently finalizing our plans to introduce this new technology in these new FiOS markets the fourth quarter."

In addition to implementing the new technology platform, Frontier will also adopt the same pricing and bundles for all of its FiOS markets.

"The FiOS platform and new Verizon pricing and bundles will become the new standard for our current FiOS markets later this year," McCarthy said. "It will allow us to have three to six months of the refreshed platform prior to integration of the new states and use this time to get the team comfortable with the new features, functionality and businesses process needed to support the current FiOS platform and then we will continue the exact pricing and bundle construction in the new markets following conversion."

There are a number of benefits to conducting this transition in advance of completing the acquisition.

For one, Frontier will not see the migration impact that it experienced when it completed the acquisition of AT&T's (NYSE: T) wireline assets in Connecticut.

"This conversion change will reduce training requirements of transferring employees, maintain the effectiveness of alternative channel partners and prevent the possibility of revenue declines with bundle migration as we experienced in Connecticut," McCarthy said.

Broadband service overall continued to be a factor in the second quarter as the company added 29,200 net customers, up from the 17,100 it added in the first quarter of 2015. The telco ended the quarter with a total of 2.4 million broadband customers.

The telco increased residential broadband share in over 75 percent of markets with more users taking speeds higher than 6 Mbps. As a result of broadband additions, residential revenue was $615 million, up from $497 million in the same period a year ago.

However, the telco reported that it lost 5,000 video customers to end the quarter with a total of 569,500 video customers. This includes 2,500 satellite video customers compared to the first quarter of 2015 losses of 7,700 video customers, including 3,500 satellite video customers.

Average monthly residential revenue per customer was $64.43 in the second quarter of 2015, up 30 cents, or 0.5 percent, compared to the first quarter of 2015.

On the business side, the service provider reported that revenues were $621 million, up year-over-year from $516 million. Frontier also narrowed business customer losses to 0.6 percent from 1.2 percent in the first quarter of 2015. The average monthly business revenue per customer was $689.21, an increase of 1.6% over the first quarter of 2015.

Overall second-quarter 2015 revenues were $1.4 billion, with operating income of $193 million and net loss of $28 million, or $0.03 per share.

Shares of Frontier were listed at $5.01, up 29 cents, or 6.14 percent, in Monday morning trading on the Nasdaq stock exchange.

For more:
- see the earnings release
- listen to the earnings call (reg req.)

Special report: Wireline telecom earnings in the second quarter of 2015

Related articles:
Ethernet Internet Access service boosts Frontier's growing wholesale channel
Frontier wins four NG911 contracts to serve New York counties
Frontier will use CAF II funding to expand broadband in acquired Verizon territories
Frontier enacts two-part OSS, customer transition plan for Verizon wireline acquisition
Frontier drives consumers to higher broadband speeds with Nest thermostat bundle

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