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Frontier Green Shoots To Consider Approaching Q4 Earnings

Glen Bradford profile picture
Glen Bradford


  • Starting in October, the infrastructure fee doubled from $1.99 to $3.99 across 4.2M customers.
  • Q4 and Q1 are the quarters where Frontier makes the majority of its annual cash flow due to lower CapEx.
  • There's a lot of low hanging fruit that the new marketing guy from Bain can circle the wagons around and target as part of the rebrand.
  • Having a larger fiber footprint allows for marketing and delivering services that would have previously not been possible.
  • The market is not appreciating the quality of their asset base. It is assigning a runoff multiple when it should be growth.

Frontier Communications (FTR) offers the most leveraged speculative investment that I think money can buy right now, and to scale too. The net debt is around $17B par and the equity trades at around $200B. The market value of the debt trades at less than $17B because a lot of it is subpar, especially the debt with expirations after 2022, which is the year when most forecasts say that more debt will come due than cash flow is available to pay down. The stock price forecasts crash and burn in a blaze of glory, but I think things aren't so bad. In my last article, I gave an overview primarily surrounding the reasons why I thought revenue and EBITDA may actually increase. I wanted to talk about a few more reasons I think that this may be near term.

Investment Thesis

The market is basically saying that as part of the capital structure, the equity is worthless as evidenced by its call option style pricing. Equity is $200M. Debt is $17000M. That's a tiny fraction and that's what happens when you get a distressed capital structure. The reason is that the market is forecasting more of the same ice cube melting revenue and EBITDA that we've seen for years. I think that the market is wrong and this affords the opportunity of a lifetime for anyone willing to place a speculative bet on the equity. The purpose of this article is to point out a few things that you may not know about that will possibly lead to a blowout fourth quarter. The stock by my calculations on a forward basis in 2019 produces $7 a share of levered free cash flow. Considering this trades at less than 1x LFCF, upside could be explosive if the company announces that they grew revenue in February along with pretty solid guidance for the year.

This article was written by

Glen Bradford profile picture
Glen Bradford MBA contributes to Seeking Alpha primarily to read people's negative feedback so that he can avoid generating unnecessary losses. "Uncertainty will certainly work for me." - Glen Bradford March 2009.Glen wishes you a bright sunny warm day filled with smiles, laughter, and love.The Supreme Court got it wrong, which is sad, but it's not over yet.

Analyst’s Disclosure: I am/we are long FTR. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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