By
Dan Radovsky
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March 21, 2013
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Fitch Ratings announced today that it has revised its outlook for Frontier Communications (NASDAQ: FTR ) from "Stable" to "Negative."
Fitch bases its revision on lowered expectations for revenue growth over the next two to three years. Also, the business and data services revenues took a modest hit in 2012, which goes against the upward trend in those areas for local exchange carriers. Business and data have been able to make up for the voice revenue losses. In addition, reforms to intercarrier compensation have lowered revenues.
Fitch does not expect great improvement in Frontier's debt leverage: 3.2x by the end of 2013, and 3.1x by the end of 2014.
On the positive side, churn has come down for residential customers, and revenues for those customers has risen. But that's set against a constant rate of decline from competition, and from the move away from wireline to wireless.
Fitch would downgrade Frontier's rating from its present "BB+" if, by the end of 2013, the company's net leverage rose to 3.3x or more, "and/or if the company does not succeed in generating positive revenue growth in business and data services."
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