Frontier Communications (OTC:FTR) reported earnings today before the bell, and the good news is that revenue is hanging in there. While analysts had settled on $1.23 billion in sales, the company managed to post heartier-than-expected revenue of $1.25 billion. 

That might look like a minor sum, but when you're a telecom seeing access lines decrease by 8% year over year as residential churn leads the losses, the key concept is that small improvements matter. In a sign of the challenges facing its business, Frontier's revenue dip of 0.5% from last quarter is its smallest sequential drop in the past year. 

It's telling that one of Frontier's earnings slides proudly boasts: "Total revenue declined only 3% yr/yr in 3Q12, FTR's best result since the July 2010 acquisition."

In the lowered-expectation environment Frontier exists in, it did well on the sales front. Yet, free cash flow might be a bit more troubling. As the company defines free cash flow, the total was $215 million last quarter. That's a 24% drop from the second quarter. That decrease is mitigated in part by the fact the company had been targeting $900 million to $1 billion in adjusted free cash flow this year. In the first half of the year, Frontier had racked up $538 million, so it was already 60% of the way to the low end of its guidance. That is, its cash flow targets were loaded toward the front half of the year. After this quarter's lessened free cash flow, Frontier stuck to its full-year free cash flow target, indicating next quarter will see another drop. 

Though the company opened this morning flat, the stock plunged just after 10 a.m. while the company's conference call was still ongoing. For the dividend lovers out there, the only mention of the company's dividend on the conference call was boasting that its free cash flow (their adjusted measure, again) exceeded its dividend payouts by $713 million in the trailing twelve months. So, no new news on that front. 

What spooked investors on the call? I don't see any glaring red flags that caused the sudden sell-off early in the morning. Perhaps given the company merely affirming cash flow with a pretty wide range that leaves this quarter's adjusted free cash flow as low as $147 million at the bottom of guidance, investors were looking for more. 

With Frontier as well as other close peers in the big-dividend telecom world like Windstream (NASDAQ:WINMQ) and CenturyLink (NYSE:LUMN)he game is the same: stem residential losses and increase revenue per business customer. On that front, Frontier saw a decent quarter with average revenue per business customer rising from last quarter and notching 9.7% jump from last year. 

The beat goes on in the big dividend telecom world. We'll have more coverage on Frontier's earnings later today on

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