Telecom & Wireless

Frontier Communications Adds Subscribers, Keeps Dividend Safe

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Frontier Communications Inc. (NASDAQ: FTR) reported third quarter 2014 results after markets closed Monday afternoon. For the quarter, the communications company posted adjusted diluted earnings per share (EPS) of $0.05 on revenues of $1.14 billion. In the same period a year ago, the company reported EPS of $0.06 on revenues of $1.19 billion. Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.04 on revenues of $1.14 billion.

Frontier is not a growth stock, it is an income play. As long as the company pays its substantial 6.1% dividend yield stockholders will stay happy. Frontier said that it has paid out 67% of third quarter free cash flow in dividends and that it has paid out 50% of free cash flow for the first nine months of the year.

At the end of the third quarter Frontier had 2.74 million residential customers and about 261,000 business customers. The company lost a net 21,800 residential customers in the quarter and the average monthly residential revenue per customer rose $0.70 sequentially to $60.34.

Frontier lost a net 3,400 business customers in the quarter. Average monthly revenue per business customer rose 1.5% sequentially to $658.56.

The company added 21,900 broadband subscribers in the quarter and has added 86,700 in the first nine months of the year. Frontier had 1.953 million broadband customers at the end of September and about 396,000 video customers.

Frontier’s CEO said:

We are very pleased to have achieved sequential growth both in residential and in business customer revenue in the third quarter. This represents continuing progress in our objective of improving our revenue trajectory. We also delivered our seventh consecutive quarter of strong broadband net additions, with market share improvements in 81% of local markets year-to-date.

The company did not offer guidance but Thomson Reuters estimates that fourth quarter EPS will total $0.05 on revenues of $1.14 billion. For the full year the estimates call for EPS of $0.20 on revenues of $4.58 billion.

Frontier’s shares are trading down about 0.5% at $6.46 in Monday’s after-hours session after closing at $6.49 in a 52-week range of $4.36 to $7.24. Thomson Reuters had a consensus analyst price target of around $6.00 before today’s report.

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