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3 Things Frontier Communications' CFO Wants Investors to Know

By Daniel B. Kline – Nov 28, 2016 at 2:42PM

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The CFO just came back to the company, but he has a strong handle on where it's going.

Perley McBride returned to Frontier Communications (FTR) as its CFO in September, after spending the previous six years in senior roles at other companies. It was a triumphant homecoming for the executive, who had two previous stints at the growing cable and internet provider between 1999 and 2010, and between 1994 and 1997.

The new CFO, who rejoined the company on Sept. 12, hit the ground running in taking over for his predecessor John Jureller, who resigned to pursue other opportunities. McBride worked with the outgoing CFO for a brief transition period before taking over the job later in September.

"Frontier has tremendous future opportunities and I look forward to being a part of Dan's [CEO Daniel McCarthy's] team as we seek to grow the business and achieve the substantial synergies and efficiencies made possible by Frontier's substantially increased scale," McBride said in the press release announcing his hiring.

Just about six weeks later, while still getting his feet wet, McBride represented Frontier at the annual Wells Fargo Securities Technology, Media & Telecom Conference. In his presentation at the Nov. 9 event, the new CFO shared his thoughts on the direction of the company going forward.

Frontier has gotten bigger, which has helped the company save money. Image source: Getty Images.

He has clear priorities

Right at the top of his speech, McBride told the audience that "at the end of the day, it's about operational execution." He noted that the first of his top three priorities is "cost containment," saying that Frontier needs to "change the cost structure of the business."

Second, the new CFO said that the company needed to make sure it spent its cash in the right places, "because ... we ultimately need to stabilize revenues and grow revenues." His third stated priority is deleveraging (paying down debt), which makes sense, given the company's recent heavy borrowing to buy Verizon's (VZ -0.13%) California, Texas, and Florida (CTF) properties for $10.54 billion.

It's about the customer

"We've always been customer-focused," said McBride, before explaining the company's recent operational changes. He noted that Frontier has spent the last three years in integration mode, first with its Connecticut properties (which it purchased from AT&T) and more recently with the Verizon acquisition.

Those deals, he explained, created a lot of scale for the company, which changed its customer-service needs. The Verizon deal more or less doubled the size of the company, and the two deals together created a company with what the CFO called a "homogeneous product set" across all its regions.

"We've made the decision to, I won't say move away from our regional structure, because we still need that to provide service to customers, but really aligning the business along consumer and commercial," he said. "Those are two very different sets of customers."

It's about synergy (and savings)

McBride explained that the company has four synergies created by its growth. The first is a lower overhead cost for the CTF properties than what Verizon was previously allocating. The second synergy from getting bigger was "that it allowed us to have continued conversations with our key vendors and suppliers, allowing us to improve contract terms." The CFO expects those savings to grow as more "things come up for renewal."

The third synergy, he explained, comes from Frontier's changed organizational structure. Under its new model, the company has centralized decision-making and streamlined its engineering process. "It allows us to streamline marketing and allows us to remove cost from the admin group, finance, HR, legal," McBride added.

Lastly, the CFO said, the company has achieved synergy by improving its systems. That, he added, was needed for the integration to happen, but it's something that will continue to pay off going forward.

"We're going to be able to take what we've done there, and bring our legacy platforms onto [the new system] as well," he said.

Daniel Kline has no position in any stocks mentioned. He thinks Perley McBride is a great name.

The Motley Fool owns shares of Wells Fargo. The Motley Fool recommends Verizon Communications.

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