Frontier Communications (NASDAQ:FTR) flies a bit under the radar compared with cable/Internet giants including Comcast (NASDAQ:CMCSA), Time Warner Cable (NYSE:TWC), and Charter Communications (NASDAQ:CHTR).
Perhaps that's because the growing company hasn't made news for poor customer service, and while it has made deals, it hasn't been part of a megadeal such as the failed Comcast attempt to buy Time Warner Cable or the ongoing efforts by Charter to do the same. Still, Frontier finished its third quarter with 3,147,000 residential customers, 294,000 business customers, and 2,434,000 broadband customers. The company also had 560,000 video customers, which is how it accounts for its satellite and telephone line pay television users.
Those numbers don't approach Comcast at over 22 million cable subscribers, but it's not far off Charter's pre-TWC merger 4.25 million. Frontier has become increasingly aggressive in its marketing and its attempts to take on its rivals directly. It's also been a player in adding customers, buying AT&T's Connecticut pay television, Internet, and landline phone subscribers and having a larger pending deal to acquire subscribers in three key states from Verizon.
Chief Financial Officer John Jureller spoke at the Nov. 10 Wells Fargo Technology, Media & Telecom Conference in New York where he laid out some of his company's plans going forward.
The company is building for the future
Even as it buys up subscribers, Frontier understands that voice lines are becoming a thing of the past and cord cutting will cut into its pay-television business.
"We're all dealing with that [cord cutting] in this sector, telcom and cable alike," Jureller said.
To help mitigate the risk, the CFO said, the company looks at the balance of its holding and the risk of people leaving. He explained that after the Verizon deal closes, the company sees only 20% of its revenue stream being subject to those problems.
'We look at, for example, the revenue streams related to residential data and residential video; those are going to be in the mid-30s of our overall revenue mix," in terms of percentage, he said. "You have to look forward as to where we're going to be really as we exit 2016."
Jureller also stated that despite the problems facing the industry, Frontier sees the next two years as a growth opportunity in revenue. "Probably a low-single-digit growth opportunity, but growth nonetheless," he said.
The CFO is confident in the CEO
Daniel McCarthy became Frontier's CEO in April 2015, and Jureller praised his boss to the audience.
"Dan is a great leader for Frontier and is the right leader at the right time," the CFO said. "He is very operationally grounded, but he is also very strategic in his thinking."
Jureller pointed out that McCarthy has largely continued the policies of his predecessor, Maggie Wilderotter, calling his changes "evolutionary, not revolutionary as we continue to drive broadband penetration, as we continue to grow our small, medium enterprise business."
M&A won't change the competitive landscape
If Charter gets Federal Communications Commission permission to purchase Time Warner Cable and Bright House Networks, it creates a large company that will go head to head with Frontier in some of its markets. Jureller expressed his respect for the Charter team but didn't think the deal would change much for Frontier.
"We compete with Time Warner today," he said, noting that Frontier would overlap with Charter's properties in 46% of its markets and Comcast in 23%. "This is nothing new. There is no new competitor that we see out there."
Jureller actually sees potential opportunity in the changes.
"There will be some customer disruption," he said, "and perhaps we can avail ourselves of some of that."
Daniel Kline has no position in any stocks mentioned. He is a Frontier customer who wishes picture quality was better on some New England Patriots games. The Motley Fool owns shares of and recommends Wells Fargo. The Motley Fool has the following options: short January 2016 $52 puts on Wells Fargo. The Motley Fool recommends Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.