Frontier Communications (NASDAQ:FTR) has delivered nothing but bad news since it spent $10.54 billion buying Verizon's former business in California, Texas, and Florida (CTF) in April 2016. That deal, which added 3.3 million voice connections, 2.1 million broadband connections, and 1.2 million FiOS video subscribers to Frontier, more than doubling its size, has been a disaster.
In the five quarters since the CTF deal took place, Frontier has lost subscribers in each one. That continued in second-quarter 2017, with the company losing 18,000 more video customers, 19,000 internet subscribers, and 27,000 phone connections. It also lost $662 million in the quarter (although much of that was due to a one-time charge) and has slashed its dividend and conducted a reverse split of its stock.
Frontier CEO Daniel McCarthy always puts a positive spin on bad numbers.
"We were pleased with the progress we made during the second quarter as we executed well on a number of key initiatives stabilizing operations," he said in the second-quarter earnings release. "In particular, we improved churn in our California, Texas and Florida (CTF) market, saw progress in our commercial business, and continued to reduce costs, which resulted in increased adjusted EBITDA margins."
That's all true, and it's an upbeat way of seeing things, but investors clearly don't buy the turnaround story. After closing July at $15.31, shares finished August at $13.47, a 12% drop, according to data provided by S&P Global Market Intelligence.
Going forward, Frontier needs to show that it can at least stop its losses, if not reverse them. That's not likely to happen because the company faces a shrinking market for pay television and it telephone companies (a group which it's a member of) have been losing broadband customers to cable providers.
This is a sinking ship fighting to stay afloat. McCarthy and his team have proven good at cutting costs and giving themselves runway, but they don't appear to have any answers when it comes to keeping customers from leaving.