Is Frontier Communications Only Worth $2.50 A Share? [View article]
"No mention of the blatant lies on the part of management re not reducing dividends? Do you trust those guys?"
I think you and I both know that the management of Frontier Communications have never promised anything regarding dividends or earnings for that matter. The same could be said for all companies listed on the exchanges regarding forward looking statements. Dividend declarations are published well in advance of pay date to give investors time to absorb the implications and make decisions concerning hold, buy, sell. Here is a link to all of their public filings and statements and if you can point me in the direction where management blatantly lied regarding dividends I think everyone would be grateful to you. http://bit.ly/OVhftP
"Do you trust those guys?" I'm running pretty low on trust these days, just running on vapours it seems. What helps me is to see management put their own money where their mouth is and make a substantial investment in the company they help manage so they have their own interest in alignment with the other investors, Like this: 06/01/12 FINARD JERI B Purchase 50,000 3.55 177,500 05/21/12 MCCARTHY DANIEL J Purchase 7,500 3.30 24,750 05/18/12 KAHAN JAMES SAMUEL Purchase 10,000 3.34 33,399 05/18/12 FRAIOLI EDWARD Purchase 7,650 3.28 25,079.00 05/18/12 MCKENNEY CECILIA K Purchase 35,000 3.31 115,850 05/18/12 WILDEROTTER MARY AGNES Purchase 15,150 3.31 50,146.50 05/18/12 SEGIL LARRAINE D Purchase 7,400 3.38 25,012 05/16/12 WICK MYRON A III Purchase 62,000 3.24 200,880
I hope I didn’t create the illusion that I am risking my money for some altruistic, honourable agenda of saving the country or helping the poor huddled masses of under-served bumpkins in small towns and rural areas. Like you I am doing the best I can to make money and to that end I invest mostly in dividend paying, low beta, soap and toothpaste stocks. If that was all I was interested in then I could turn my computer off and get back to my yard and garden work. I have a small amount of money that I use to have some fun with in high risk / high reward stocks. Some of them are more like lottery tickets than stocks.
I did due diligence, to my own satisfaction, when I bought FTR. Here is why I bought it and will likely add to my position.
1. Almost exactly 2 years ago FTR bought Spinco a wholly owned subsidiary of Verizon and tripled their size with that acquisition. Something like a canary swallowing a cat. 2. Last year, 2011, was their first year to integrate the acquisition covering something like 24 states and 130 regions into their legacy systems. The transactional and integration cost have largely been absorbed at this point. 3. Management and the Board of Directors have in March of this year instituted executive pay reforms for the CEO and named executive officers that link their compensation to shareholder interest in terms of stock price and dividend return by using restricted share disbursement with a vesting time of 3 years as substantial share of their compensation. 4. Some synergies which will increase productivity have been identified and implemented, although have not as yet had time to be reflected in the balance sheet. There should be many more to be yet identified and implemented. 5. The company has sufficient earnings to support the dividend at this time and I believe it is the dividend which give the stock the low beta. 6. I am willing to give management the time and opportunity to execute their plan as stated in the most recent 10Q, vis a vis reduce long term debt, increase productivity, sales and free cash flow. 7. Unless someone is blowing smoke up my skirt this seems like one of the most shareholder friendly and customer facing companies I have looked at recently.
I certainly appreciate the views that you have shared here, We are all trying to get as much information as we can both positive and negative, so for that I thank you.
I have been doing a little research and looking over some historical data like the PEG ratio of Lehman Brothers shortly before they collapsed and have come to the conclusion that these numbers can change, they are not chiselled into stone. It is management's job to correct these numbers, (that’s why they get the big bucks). I took a look at Frontiers new executive compensation plan, designed to better align management compensation with total investor interest, and I was impressed. I think tying executive compensation closely to stock price and dividend return will go a long way over the next three years to make their numbers look better, at least I hope so. That is why I am investing now while they are near and all time low rather than wait three years and miss out. After all isn’t that what we are all doing? Placing hopeful bets.
I think everyone realizes that growth is in wireless communications and that is the reason the small town and rural areas are shunned by the large telecoms. Still, that begs the question, "How and by whom are these markets to be served?" The government has the duty to see to it that ALL citizens and taxpayers have equal access to such things as electricity, mail, communications, medical, etc., even in remote and expensive areas to serve. Some of your tax dollars are currently subsidizing this effort. Would it suit you better for the private enterprise that is currently attempting to serve this niche market to be nationalized and supported entirely by your tax dollars? That's the beauty of a free market. No one is forcing you to invest in this sector or any other. At the same time you could be more tolerant of those of us who chose to speculate on risky stocks that pay high dividends and some of us believe even have growth potential. After all, if we fail and the government has to take over, you will lose you freedom to NOT participate when you receive your tax bill. You should be wishing us well.
I expect this growing realization will provide a macro-economic backdrop for future growth in telecommunication companies like Frontier. "The Internet has become an important resource with real economic impact: every 10 percent increase in broadband penetration within a country drives a 1.3 percent additional growth in the Gross Domestic Product (GDP), according to a recent UNESCO/ITU Broadband Commission report." http://bit.ly/Paqwlz
Is Frontier Communications Only Worth $2.50 A Share? [View article]
I am not sure I understand your comment but then I am not an accountant. I am looking at the 10-Q quarterly report Nov 9, 2010 when the debt was acquired. http://bit.ly/LjUBtV This was not toxic debt, rather it was the purchase of a cash cow, at least in my view. They paid 5.4 billion to triple the size of their business and gain 3 million customers. and assumed 3 billion of Spincos' debt. The spin-off from Verizon of its local exchange and related landline activities in 14 states into Spinco and the subsequent merger of Spinco into Frontier became effective on July 1, 2010. In the distribution, each Verizon stockholder received one share of Frontier common stock for every 4.165977 shares of Verizon common stock held as of 5:00 pm Eastern time on June 7, 2010. Fractional shares resulting from the spin-off were sold at a price of $7.1846 per share of Frontier common stock.
The fair value of the total consideration issued to acquire the Acquired Business amounted to $5.4 billion and included $5.22 billion for the issuance of Frontier common shares and cash payments of $105.0 million. As a result of the Merger, Verizon stockholders received 678,530,386 shares of Frontier common stock. Immediately after the closing of the Merger, Verizon stockholders owned approximately 68.4% of the combined company’s outstanding equity, and existing Frontier stockholders owned approximately 31.6% of the combined company’s outstanding equity.
They paid for the whole thing with shares valued at $7.18 and $105 million in cash which comes to about $1800 per customer account according to my back of the envelope numbers, I 2011 they reduced the dividend twice from $0.25 to $0,18 and finally to the present $0.10. Here we are two years later the stock price and capitalization has dropped about 60% and is paying a 10% dividend. The cost of acquiring those 3 million customers has also dropped 60% to $720 each.
The 2012 Executive Compensation Plan which has just been initiated should be effective to better align management with total shareholder values and if I am reading the 2012 Proxy Statement right it has goals of a stock price of $8.38 at the end of three years. I have not found a single analyst who anticipates any further dividend cuts in the next two years,
(will land lines still exist?) I don't know but I certainly hope so. I am a rural customer who for the past three years has been with Verizon Wireless and finally gave up and switched back to a land line and DSL. The wireless was so slow and worse than dial-up. I struggled every month to stay below the band-width limit of 5ghz without using any video or music at all. I now have high speed internet without bandwidth limitations and all with better service at a cheaper price. I have serious doubts about the big two investing in the infrastructure required in small town and rural areas to offer cheap, reliable, unlimited bandwidth but the FCC wants it to be done. So who will do it. Maybe landlines will go the way of pay telephones but as I gaze into my crystal ball today I expect to earn 10% on my shares and to double in price in three years. Anyway thanks for your thoughts and good luck on your investments.
Is Frontier Communications Only Worth $2.50 A Share? [View article]
Thanks for the very interesting, informative and well written article Global Value Investor. Although the negative outlook that you present seems to be already factored in to how the market is pricing FTR. You seem to be taking a "Damned if you do, damned if you don't" approach. The company took on some debt to triple the size of the business and cut dividends to help service that debt. Why is that bad?
Here are a few of the more optimistic views some have.
Quoted from the 2012 Proxy Statement available at the company website.
• On July 1, 2010, the company completed its acquisition of approximately 4.0 million access lines across 14 states and related business assets from Verizon Communications Inc., which tripled the size of the company. During 2011, the company made significant progress on the integration of the acquisition and began to improve financial metrics and customer retention. • In 2011, we lowered access line churn by 8.3%, delivered $5.2 billion in revenues and $1.7 billion in operating cash flow, achieved $552 million in acquisition synergies, built-out High-Speed Internet availability to over 415,000 additional homes and added 45,200 new high speed customers. • In October 2011, we converted the entire acquired business to the company’s legacy financial and human resources systems and four of the thirteen states of the acquired business to our legacy customer and operating systems. In March 2012, the company commenced the conversion of the remaining nine states of the acquired business onto the company’s legacy customer and operating systems. The completion of the conversions will significantly enhance the company’s ability to effectively manage the business and reduce costs. • Despite the ongoing challenging economic environment, we continued to deliver solid operating performance, both on an absolute and a relative basis. Our performance against the financial metrics we use to measure our executives was 93.9% of the targets, on average, established by the board of directors in February 2011. However, as this was below target, compensation payouts were reduced accordingly. See “Cash Compensation—Annual Bonus” below. • For 2011, we modified the Frontier Bonus Plan, the company’s annual cash incentive bonus plan, to more strongly align executive compensation with annual performance. We instituted a performance threshold below which no incentive cash bonuses will be awarded. In addition, we incorporated performance leverage into the bonus plan. As a result, we increased upside potential for above-target performance and decreased bonus payouts for below-target performance. This design increases the incentive for executives to exceed targets. See “Cash Compensation—Annual Bonus” below. • Consistent with our compensation philosophy, 82% of our CEO’s 2011 compensation was “at risk” and contingent upon performance against specified company and individual goals, and of that amount, 74% was in the form of restricted stock. Similarly, for the other named executive officers as a group, 76% of their total compensation was at risk, and of that amount, 72% was paid in restricted stock. See “Compensation Mix” below. • Consistent with executive compensation best practices, we amended our stock ownership guidelines to increase the amount of stock our Senior Leadership Team members are expected to own. See “Equity Compensation—Stock Ownership Guidelines” below. • At our 2011 Annual Meeting of Stockholders held on May 12, 2011, stockholders voted in favor of our executive compensation program, with over 93% approving our executive compensation program, philosophy and disclosure.
If FTR falls to $2,50 any time soon I am sure there will be no shortage of buyers, including me.
Why is Paul Tudor Jones Buying More Frontier Communications and not Facebook? http://bit.ly/OHd44R
Is Frontier Communications Only Worth $2.50 A Share? [View article]
I think you and I both know that the management of Frontier Communications have never promised anything regarding dividends or earnings for that matter. The same could be said for all companies listed on the exchanges regarding forward looking statements. Dividend declarations are published well in advance of pay date to give investors time to absorb the implications and make decisions concerning hold, buy, sell. Here is a link to all of their public filings and statements and if you can point me in the direction where management blatantly lied regarding dividends I think everyone would be grateful to you.
http://bit.ly/OVhftP
"Do you trust those guys?"
I'm running pretty low on trust these days, just running on vapours it seems. What helps me is to see management put their own money where their mouth is and make a substantial investment in the company they help manage so they have their own interest in alignment with the other investors, Like this:
06/01/12 FINARD JERI B Purchase 50,000 3.55 177,500
05/21/12 MCCARTHY DANIEL J Purchase 7,500 3.30 24,750
05/18/12 KAHAN JAMES SAMUEL Purchase 10,000 3.34 33,399
05/18/12 FRAIOLI EDWARD Purchase 7,650 3.28 25,079.00
05/18/12 MCKENNEY CECILIA K Purchase 35,000 3.31 115,850
05/18/12 WILDEROTTER MARY AGNES Purchase 15,150 3.31 50,146.50
05/18/12 SEGIL LARRAINE D Purchase 7,400 3.38 25,012
05/16/12 WICK MYRON A III Purchase 62,000 3.24 200,880
http://bit.ly/O9FtBv
That's what helps me trust them.
Frontier Ready For A Big Bounce [View article]
I did due diligence, to my own satisfaction, when I bought FTR. Here is why I bought it and will likely add to my position.
1. Almost exactly 2 years ago FTR bought Spinco a wholly owned subsidiary of Verizon and tripled their size with that acquisition. Something like a canary swallowing a cat.
2. Last year, 2011, was their first year to integrate the acquisition covering something like 24 states and 130 regions into their legacy systems. The transactional and integration cost have largely been absorbed at this point.
3. Management and the Board of Directors have in March of this year instituted executive pay reforms for the CEO and named executive officers that link their compensation to shareholder interest in terms of stock price and dividend return by using restricted share disbursement with a vesting time of 3 years as substantial share of their compensation.
4. Some synergies which will increase productivity have been identified and implemented, although have not as yet had time to be reflected in the balance sheet. There should be many more to be yet identified and implemented.
5. The company has sufficient earnings to support the dividend at this time and I believe it is the dividend which give the stock the low beta.
6. I am willing to give management the time and opportunity to execute their plan as stated in the most recent 10Q, vis a vis reduce long term debt, increase productivity, sales and free cash flow.
7. Unless someone is blowing smoke up my skirt this seems like one of the most shareholder friendly and customer facing companies I have looked at recently.
I certainly appreciate the views that you have shared here, We are all trying to get as much information as we can both positive and negative, so for that I thank you.
Frontier Ready For A Big Bounce [View article]
Frontier Ready For A Big Bounce [View article]
Frontier Ready For A Big Bounce [View article]
"The Internet has become an important resource with real economic impact: every 10 percent increase in broadband penetration within a country drives a 1.3 percent additional growth in the Gross Domestic Product (GDP), according to a recent UNESCO/ITU Broadband Commission report."
http://bit.ly/Paqwlz
Is Frontier Communications Only Worth $2.50 A Share? [View article]
http://bit.ly/LjUBtV
This was not toxic debt, rather it was the purchase of a cash cow, at least in my view. They paid 5.4 billion to triple the size of their business and gain 3 million customers. and assumed 3 billion of Spincos' debt. The spin-off from Verizon of its local exchange and related landline activities in 14 states into Spinco and the subsequent merger of Spinco into Frontier became effective on July 1, 2010. In the distribution, each Verizon stockholder received one share of Frontier common stock for every 4.165977 shares of Verizon common stock held as of 5:00 pm Eastern time on June 7, 2010. Fractional shares resulting from the spin-off were sold at a price of $7.1846 per share of Frontier common stock.
The fair value of the total consideration issued to acquire the Acquired Business amounted to $5.4 billion and included $5.22 billion for the issuance of Frontier common shares and cash payments of $105.0 million. As a result of the Merger, Verizon stockholders received 678,530,386 shares of Frontier common stock. Immediately after the closing of the Merger, Verizon stockholders owned approximately 68.4% of the combined company’s outstanding equity, and existing Frontier stockholders owned approximately 31.6% of the combined company’s outstanding equity.
They paid for the whole thing with shares valued at $7.18 and $105 million in cash which comes to about $1800 per customer account according to my back of the envelope numbers, I 2011 they reduced the dividend twice from $0.25 to $0,18 and finally to the present $0.10. Here we are two years later the stock price and capitalization has dropped about 60% and is paying a 10% dividend. The cost of acquiring those 3 million customers has also dropped 60% to $720 each.
The 2012 Executive Compensation Plan which has just been initiated should be effective to better align management with total shareholder values and if I am reading the 2012 Proxy Statement right it has goals of a stock price of $8.38 at the end of three years. I have not found a single analyst who anticipates any further dividend cuts in the next two years,
(will land lines still exist?) I don't know but I certainly hope so. I am a rural customer who for the past three years has been with Verizon Wireless and finally gave up and switched back to a land line and DSL. The wireless was so slow and worse than dial-up. I struggled every month to stay below the band-width limit of 5ghz without using any video or music at all. I now have high speed internet without bandwidth limitations and all with better service at a cheaper price. I have serious doubts about the big two investing in the infrastructure required in small town and rural areas to offer cheap, reliable, unlimited bandwidth but the FCC wants it to be done. So who will do it.
Maybe landlines will go the way of pay telephones but as I gaze into my crystal ball today I expect to earn 10% on my shares and to double in price in three years. Anyway thanks for your thoughts and good luck on your investments.
Is Frontier Communications Only Worth $2.50 A Share? [View article]
Here are a few of the more optimistic views some have.
Quoted from the 2012 Proxy Statement available at the company website.
• On July 1, 2010, the company completed its acquisition of approximately 4.0 million access lines across 14 states and related business assets from Verizon Communications Inc., which tripled the size of the company. During 2011, the company made significant progress on the integration of the acquisition and began to improve financial metrics and customer retention.
• In 2011, we lowered access line churn by 8.3%, delivered $5.2 billion in revenues and $1.7 billion in operating cash flow, achieved $552 million in acquisition synergies, built-out High-Speed Internet
availability to over 415,000 additional homes and added 45,200 new high speed customers.
• In October 2011, we converted the entire acquired business to the company’s legacy financial and human resources systems and four of the thirteen states of the acquired business to our legacy customer
and operating systems. In March 2012, the company commenced the conversion of the remaining nine states of the acquired business onto the company’s legacy customer and operating systems. The
completion of the conversions will significantly enhance the company’s ability to effectively manage the business and reduce costs.
• Despite the ongoing challenging economic environment, we continued to deliver solid operating performance, both on an absolute and a relative basis. Our performance against the financial metrics we use to measure our executives was 93.9% of the targets, on average, established by the board of directors in February 2011. However, as this was below target, compensation payouts were reduced accordingly. See “Cash Compensation—Annual Bonus” below.
• For 2011, we modified the Frontier Bonus Plan, the company’s annual cash incentive bonus plan, to more strongly align executive compensation with annual performance. We instituted a performance
threshold below which no incentive cash bonuses will be awarded. In addition, we incorporated performance leverage into the bonus plan. As a result, we increased upside potential for above-target
performance and decreased bonus payouts for below-target performance. This design increases the incentive for executives to exceed targets. See “Cash Compensation—Annual Bonus” below.
• Consistent with our compensation philosophy, 82% of our CEO’s 2011 compensation was “at risk” and contingent upon performance against specified company and individual goals, and of that amount, 74% was in the form of restricted stock. Similarly, for the other named executive officers as a group, 76% of their total compensation was at risk, and of that amount, 72% was paid in restricted stock. See “Compensation Mix” below.
• Consistent with executive compensation best practices, we amended our stock ownership guidelines to increase the amount of stock our Senior Leadership Team members are expected to own. See “Equity Compensation—Stock Ownership Guidelines” below.
• At our 2011 Annual Meeting of Stockholders held on May 12, 2011, stockholders voted in favor of our executive compensation program, with over 93% approving our executive compensation program,
philosophy and disclosure.
If FTR falls to $2,50 any time soon I am sure there will be no shortage of buyers, including me.
Why is Paul Tudor Jones Buying More Frontier Communications and not Facebook?
http://bit.ly/OHd44R