Frontier CEO Discusses Q3 2010 Results - Earnings Call Transcript
Frontier Communications Corporation (
)
Q3 2010 Earnings Call
November 8, 2010 9:00 AM ET
Executives
Gregory Lundberg – Director, Investor Relations
Maggie Wilderotter – Chairman and CEO
Don Shassian – Chief Financial Officer
David Whitehouse – SVP and Treasurer
Analysts
Scott Goldman – Goldman Sachs
Batya Levi – UBS
Michael Rollins – Citi
Simon Flannery – Morgan Stanley
Chris King – Stifel Nicolaus
Gray Powell – Wells Fargo
Chris Larson – Piper Jaffray
Frank Louthan – Raymond James
Presentation
Operator
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Frontier Communications Corp. Q3 2009 Earnings Call Transcript
Please standby, we are about to begin. Good day, everyone. And welcome to the Frontier Communications [Second] Quarter 2010 Results Conference Call. This call is being recorded.
At this time, I would like to turn the call over to Mr. Gregory Lundberg. Please go ahead, sir.
Gregory Lundberg
Thank you, Alan. Good morning, everyone. The purpose of this call is to discuss 2010 third quarter results for Frontier Communications, which were released this morning and are available on our website, including the supplemental information. If anyone needs a copy of the materials please contact Lisa Lombardo at 203-614-5064. We anticipate the Form 10-Q will be filed later this week.
On today’s call are Maggie Wilderotter, Chairman and Chief Executive Officer; Don Shassian, Chief Financial Officer; and David Whitehouse, Treasurer. During this call we’ll be making certain forward-looking statements, in particular and matters related to 2010 results and estimates. Please review the Safe Harbor language found in our press release and SEC filings.
On this call we’ll be discussing GAAP and non-GAAP financial measures as defined under SEC rules. In our earnings release and on our website, frontier.com, we have provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. Please refer to this material during our discussion.
I will now turn the call over to Maggie.
Maggie Wilderotter
Thanks, Greg, and good morning, everyone. Thank you for joining our call today to discuss third quarter 2010 results for Frontier Communications Corporation. We’re excited to be reporting our first financial results as the new Frontier, following the completion of our July 1st acquisition of Verizon properties. We know that you’ve all been waiting patiently for these numbers and we believe that the wait has been worthwhile.
Frontier’s third quarter results demonstrate the improvements that are already happening in the acquired properties, our confidence in our business plan and the strong and steady results in our legacy business. In Q3 2010, Frontier realized synergies of $63 million in the acquired properties. This is a $252 million annualized rate and was achieved from the elimination of corporate overhead costs and other wage and non-wage synergies.
Looking forward, this permanent reduction along with continued synergy realization, gives us confidence to raise our 2013 synergy run rate estimate by 10% to $550 million. This positive lift to our synergy target is on top of a very solid quarter as the new Frontier.
Our Q3 revenues were $1.4 billion and adjusted operating cash flow or EBITDA of $671 million that represented a strong margin of 48%. We converted this into free cash flow of $339 in the third quarter and paid 55% of this to our shareholders as dividends.
Consistent with our position since we first announced the Verizon transaction, Frontier is successfully managing a business three times its former size in terms of revenues and employees. We believe this success is being driven by strong leadership, a focus on customer sales and retention and by implementing our local engagement model in all new markets.
In the four months that we have owned the acquired properties we have laid a solid foundation for the future business. We manage Frontier’s business internally by focusing on three key drivers of value for our company, people, products and profits. Managing the business this way differentiated Frontier’s legacy business this quarter by driving improved customer metrics, rising ARPU and strong margins.
Let me start with people. As I mentioned, our employees tripled in number at closing and implementing cultural change has been one of our primary missions. Our senior leadership team has met with every one of our employees over the past few months and I have personally met with 11,000 new and legacy Frontier employees, since closing.
Our people are energized and engaged in the Frontier mission and values. They’re truly owners of the company because on July 1st we made every employee a shareholder of Frontier. This gesture linked our legacy and new employees together. All employees are working toward the same three goals, keep and grow access lines, accelerate high-speed Internet deployment and growth, and implement local engagement to enhance the customer experience. Everyone from our call center reps to field technicians knows that these goals will improve the results of our business, sustain jobs and communities, and build on our foundation of quality, reliability and trusted interactions with our customers.
Some examples, we’ve looked at processes and procedures and eliminated what’s unnecessary. This basic blocking and tackling has a big positive financial impact. We have deployed local area managers to our new markets, majority of these managers were trained by Frontier well before close. They now have access to daily sales and retention customer activity that they never had before to help them run their business. You can’t know how you’re doing if you don’t have daily reports on customer gross adds and deactivations.
All 7,000 technicians in our new markets now report to their local area managers, not to a distant centralized group. These technicians are doing full installations for high-speed, keeping two hour appointment windows and will resolve any technical problem a customer experiencing. Each tech is trained to handle voice, high-speed Internet and any other issues pertaining to our network for both business and residential customers.
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