Frontier CEO: OTT video 'more important than anything else'

Frontier Communications (Nasdaq: FTR) reported first-quarter 2012 revenue dipped nearly 7 percent, to $1.27 billion, from $1.35 billion a year ago, and continued to shed the FiOS customers it acquired when it bought Verizon's (NYSE: VZ) landline business in 14 states in July 2010.

Maggie Widerotter

But, the company said it was aggressively looking at video--especially over-the-top delivery--as an important piece of its business.

The Stamford, Conn.-based company attributed the decreases to fewer residential and business customers, switched access, data services and video revenue. When it initially acquired the Verizon business, Frontier nearly tripled in size, providing services to 4 million residential, including FiOS, and business customers in 27 states. The company now has 3.34 million customers.

But, said chief executive Maggie Wilderotter, the integration of the Verizon business has been completed, opening doors for the telco.

"After a long road, Frontier systems integration of the Verizon acquisition is completed... We are now in complete control of our systems, processes, products, marketing and the delivery of a better customer experience," she said. "Our efforts will now be focused on three things: One, revenue growth; two, broadband leadership; and three, operational excellence."

Unfortunately, the company missed the first quarter earnings expectations of analysts, delivering net income of $26.8 million, or 3 cents a share, compared to $54.7 million, or 5 cents a share, a year ago. Analysts had expected earnings of 6 cents per share.

But Wilderotter said Frontier's revenue growth will accelerate in the third and fourth quarters, a result of running their own systems after the integration.

Frontier continued to slough off FiOS customers, something it's done in every quarter since it acquired the business. Frontier has maintained that it could not support the high cost of acquiring content on the service and has dramatically increased the install cost of the service in Indiana, Oregon and Washington.

It lost 4,800 customers this quarter, on the heels of 5,900 FiOS video subs quitting the service last quarter. But it added a net 9,200 satellite customers this quarter.

But Wilderotter said the company had "gone to school" on the FiOS products and was now "aggressively selling FiOS in the 3 markets we have."

"It is a very high cost to operate FiOS video," she said. "We have said that in the past, and we continue to look at that as a stumbling block for us deploying any further IPTV on that type of a platform."

Because of that, she said, Frontier has been evaluating other alternatives, including AT&T's (NYSE: T) U-verse.

"We have not announced anything in terms of us doing anything different than what we are doing today," Wilderotter said. "But we do like the U-verse product. We think it's a product that can work, not just on fiber, but it also works on copper as well. So it's a lot more forgiving in the market."

Frontier will also look at "a couple of other IPTV capabilities."

"(IPTV) doesn't make sense in all of our markets," she said. "Video is very important. We think over-the-top video is probably more important than anything else."

The stock closed Tuesday at $3.26. It's traded between $3.06 and $8.97 over the past 52 weeks.

For more:
- see this release 
- see this earnings call transcript

Special Report: IPTV earnings in the first quarter of 2012

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