Frontier Communications (FTR) CEO Dan McCarthy has never wavered from his steadfast belief that his company will eventually turn itself around. He continually finds positive news to share with investors in the face of ongoing subscriber loss.
The cable, internet, and phone company saw revenue in its second quarter drop to $2.16 billion from $2.3 billion in the year-ago period. It also saw its net loss per share more than double to $0.92 from the first quarter's $0.44 per share loss.
Subscriber counts also fell from just over 5 million the in the year-ago period to 4.6 million in Q2 2018. Despite those negatives, McCarthy remained confident and on message in the Q2 earnings release.
"We continued to make further progress in the second quarter with the key initiatives that we have under way across the company," said McCarthy. "We are pleased to have maintained good subscriber momentum despite facing typical second-quarter seasonal headwinds. Underlying trends should continue improving in the latter half of this year, once summer seasonality is behind us."
Efforts to save continue
Frontier is in its current situation because it spent $10.54 billion in April 2016 buying Verizon's wireless business in California, Texas, and Florida (CTF). That purchase added 3.3 million voice connections, 2.1 million broadband connections, and 1.2 million FiOS video subscribers to the company, although it has lost subscribers every quarter since the sale closed.
That deal, however, did succeed in one area. Frontier was able to cut a lot of expenses (about $1 billion heading into 2018), and it was able to save even more in the most recent quarter.
"We successfully concluded our $350 million synergy program in the second quarter," said McCarthy. "We have begun our next phase of corporate transformation, which entails both revenue enhancement and productivity improvement initiatives with targeted EBITDA benefits of $500 million by year-end 2020."
Customer-facing improvements continue
During the Q1 call, McCarthy noted that the company was having success using tools that allow it to diagnose problems early. That helps it cut down on issues that require sending a technician out instead of just handling the problem over the phone.
Frontier, its CEO added, has also made progress in cutting wait times in its outsourced call center. Efforts to improve the customer experience are continuing.
"We have prioritized and sequenced both existing and newly identified improvement opportunities," he said during the Q2 earnings call, which was transcribed by Seeking Alpha (registration required). "We are allocating dedicated resources to move as rapidly as possible in implementing these initiatives to drive improved results."
The company has enough cash
Frontier shareholders have had to suffer through a reverse stock split and the suspension of its dividend. The second of those two moves was made to preserve cash so the company can meet its debt obligations. CFO R. Perley McBride, who is leaving the company at the end of August, made it clear during the call that it does.
"Upcoming unsecured maturities are manageable, particularly when considered against our operating free cash flow guidance of $800 million for this year," he said. "We have about $440 million of bonds coming due in Q4 2018, and about $400 million in 2019. We have ample liquidity to meet these obligations, as well as the runway, to realize the potential of our strategic plan."
McCarthy has had different excuses to explain subscriber loss in each quarter since the CTF deal closed. First it was problems due to the change in companies, then it was a one-time purge of customers who never paid, and now it's "seasonality."
Frontier has managed its resources and creditors well. That gives it time to get is subscribers under control, but so far, that's not something it has shown it can do.