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Can Frontier's Leadership Save the Stock?

With its huge dividend yield, Frontier Communications (NASDAQ: FTR  ) has inspired income investors to take a closer look at the rural telecom company. But with the stock having performed badly over the long run, many investors are looking for corporate leaders to take a more active role in helping pull the stock back from the brink of ruin.

Investors need to keep particular watch at Frontier as it seeks to compete against fellow rural specialists Windstream and CenturyLink to provide more relevant and higher-margin services. That's the thesis of my premium report on Frontier Communications, which includes the following description of its CEO and management team. Let's take a closer look at who's running the show at Frontier.

CEO Maggie Wilderotter has been at the helm at Frontier since 2004 and also serves as the chairperson of its board of directors. Before joining Frontier, she worked at Microsoft, AT&T Wireless, and McCaw Cellular before AT&T acquired it. Wilderotter clearly has plenty of experience in the telecom industry, and many praise her for her vision and leadership skills.

Unfortunately, Wilderotter hasn't had her incentives aligned with shareholders particularly well. In 2011, despite a plunging share price, she received more than $6.7 million in compensation, almost 40% more than she earned two years previously. Yet as of the company's most recent proxy statement, she owned only 3 million shares of stock -- more than half of which are restricted shares. Moreover, Wilderotter has an employment agreement that would pay her millions in the event of a change of control in the company -- roughly $13.5 million as of the end of 2011.

Wilderotter remains convinced that Frontier will be able to beat its competitors on the basis of customer service. But the actions that the company has taken seem to contradict that stance. In many of its newly acquired markets, Frontier either raised FiOS monthly service prices or installation costs, driving the customers it had just spent so much to acquire straight into the arms of competitors offering the same service at cheaper prices.

It's also unclear whether Wilderotter has the support of Frontier's employees. According to glassdoor, only 26% of those rating Wilderotter approved of her job performance as CEO.

Learn more
That was just a part of the Motley Fool's premium research report on Frontier Communications. To find out more about the rural telecom industry, including whether Frontier is the best buy in the industry right now, you'll want to read the full report on Frontier. It also includes regular updates as events occur, so click here now and get your report today.

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  • Report this Comment On January 16, 2013, at 10:32 PM, valueinvesting12 wrote:

    I looked up many companies on Glassdoor, and the employee reviews are basically the same; just the name of the company changes.

    Here's one example of a Frontier employee's comment that could apply to probably 90% of the big companies out there: "Middle management is defunct... Human Resourses is defunct... Safety is an after thought... management has fostered a work environment that pits craft employees against each other with favoritism and nepotism. Transferring or job promotion is done by favoritism if at all."

    The bad reviews from Frontier employees are mostly just comments on the state of modern bureacracy and corporate America, not on Frontier specifically.

    And with Frontier having a unionized workforce, it creates a higher level of nastiness beyond the usual fare. (One wouldn't expect many unionized workers to approve of the CEO, for example.)

    In short, I would take the Glassdoor reviews with a huge grain of salt.

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