Frontier Communications Upped To Buy On Growth Prospects

On Jul 8, 2016, Zacks Investment Research upgraded Frontier Communications Corporation (NASDAQ:FTR) to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold). The company’s management anticipates strong broadband subscriber growth this year and believes growth will be driven by new marketing plans and programs.

Launch of Premium Service

Frontier has recently launched its latest line of services – Vantage – a premium digital platform to deliver HD TV, ultra-fast broadband and enhanced Voice over Internet Protocol (VoIP) services. We believe that the introduction of a premium brand will enable the company to maintain sustainable broadband subscriber growth.

Launches OTT Services

Meanwhile, Frontier has collaborated with other companies to offer an array of differentiated products, which includes the launch of its Over-the-Top (OTT) service, Freedom TV, as part of its video offerings for residential and business customers across multiple markets. The company has teamed up with TiVo Inc. (NASDAQ:TIVO) and Amazon.com Inc. (NASDAQ:AMZN) for Freedom TV.

Purchases Verizon’s Wireline Assets

Frontier Communications has also completed the purchase of Verizon Communications Inc.’s (NYSE:VZ) wireline assets worth $10.5 billion in California, Florida and Texas. Currently, Frontier Communications operates landline business and provides broadband, video, voice and FiOS services in all of these three states. Notably, half of the network runs on high-quality fiber-to-the-home (FTTH) technology. Frontier Communications will be able to use them as part of its service expansion drive and leverage the same to provide off-net capabilities to its customers. We expect the Verizon deal to drive free cash flow and revenues at Frontier Communications, apart from helping the company maintain its practice of paying regular and incremental dividends.

Focus on Enterprise Businesses

Frontier Communications is leaving no stones unturned to derive benefits from the growing Business Service segment either. The company has been particularly targeting the Small and Medium Businesses (SMBs). It has been enhancing its Ethernet capabilities lately in its efforts to retain SMB customers with attractive plans.

Potential Headwinds

Frontier Communications expects to continue experiencing a decline in wireless backhaul revenues in 2016. This is because a number of its carrier partners could opt for Ethernet solutions at lower prices while some customers may switch to competitors. Thus, a deteriorating wireless backhaul business is expected to remain a major headwind for Frontier Communications, going ahead.

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