Wells Fargo Downgrades Frontier After Transition Woes Reduce Revenue
Frontier Communications showed weak revenue in newly acquired markets from Verizon, Wells Fargo analysts said after Frontier released Q3 results Wednesday. In April, Frontier acquired Verizon wireline assets in Florida, Texas and California but experienced a bumpy transition that’s still…
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getting attention from state regulators and politicians (see 1610130059). In a research note Wednesday, Wells Fargo analysts said they downgraded Frontier to “market perform” from “outperform” because of “continued weakness in revenue in newly acquired markets,” sequentially weaker broadband adds despite commentary that there would be improvement, and still high integration costs. For Q3, Frontier reported $2.52 billion revenue and $999 million adjusted EBITDA, which was lower than Wells Fargo projections of $2.58 million and $1 billion, respectively, the analysts said. Frontier reported 99,000 broadband net losses in the quarter, which was worse than the analysts’ predicted loss of 50,000 as well as Frontier’s Q2 loss of 77,200 customers, they said. “While management noted that they had seen some improvement in October, they seemed hesitant to guide toward significant Q4 improvement.” In a news release announcing Q3 results, Frontier CEO Dan McCarthy said, “We are on course to improve our revenue performance, principally by returning to normal customer trends in the [California, Texas and Florida] market over the coming quarters.” Frontier stock sank 13.74 percent to $3.39 in Wednesday trading.