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Addressing An Existential Threat To This Telecom


  • The telecom sector is wrought with competition for consumer and business clientele and Frontier communications has been decimated in recent years.
  • There are two main issues the company has to address in our view to improve its financial position and longevity.
  • The dividend should have been eliminated much sooner despite the pain it caused those chasing high-yield.
  • The top line can improve if and only if the churn is properly addressed.
  • The continued losses are an existential threat to the company and its balance sheet.

The telecom sector is full of intense competition for consumer and business clients. Many of the players in this space have been operating under immense pressure in recent years and this is quite true for Frontier Communications Corporation (NASDAQ:FTR).

This telecom just reported Q4 earnings and while the quarter was better than we expected in some regards, the stock took another absolute beating. While there are many takeaways from this quarter, we are focused on two which we would like to discuss in the present column, both of which are major issues and both of which we feel if improved upon, would be bullish for the stock.

The first issue is the dividend and we have opined on numerous occasions that the dividend would be cut and cut and eventually eliminated. Second and perhaps more importantly the loss of customers continues to be unsustainable. The company absolutely must address the latter or investors will continue to suffer.

We have been overtly bearish, but what would change that?

There is no denying that we have been overtly bearish on the company and the stock. For over two years we have issued bearish warnings time and again. While we hate to see anyone lose money, we have been warning you to stay away from this name. Finally, it came to a pass in August. We had enough and said "get out while you can." The stock has continued to suffer:

Source: Yahoo finance

That said, we believe that the company can start to right the ship if it got a handle on the dividend and its loss of customers. A clear improvement in both issues would be long-term bullish in our opinion.

The dividend

The dividend has long been a concern for us and it was cut time and again. We strongly argued

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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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