Standard & Poor's Rating Services has changed its assessment of Frontier Communications' (FTR +0.00%) financial risk profile from "significant" to "aggressive," causing the ratings agency to downgrade the telecommunications company even deeper into what's considered junk territory.
S&P lowered Frontier's rating from "BB" to "BB-", which drops the company three steps below investment grade.
Frontier's prospects, according to S&P, are constrained by a combination of tough wireline competition and the trend away from wireline toward wireless communication. The third quarter saw Frontier take a 3% hit in revenue and a 5% decline in EBITDA over the same period last year caused by annual access line losses of around 8%.
However, S&P does see Frontier's outlook as stable if it can maintain leverage in the low four-times EBITDA range. Frontier's rating could go up if it can lower its debt to EBITDA, S&P said, but because of the company's expected low cash flow after it pays off its dividend, S&P sees this as unlikely.
