Frontier Communications Corp (NASDAQ:FTR)
Frontier Communications Negative Rating
Moody’s also downgraded the company’s probability of default rating from B1-PD to B2-PD, having also revised its secured rating to B1 from Ba3 and unsecured rating to B2. The B2 rating reflects the company’s predictable cash flow and extensive network assets. According to Frontier, the fact that the company has proved its ability to generate cash flow justifies the ratings.
Frontier Communications Corp (NASDAQ:FTR) speculative liquidity grading, on the other hand, remains unchanged at SGL-2 with its negative outlook also remaining unchanged. Moody’s remains skeptical about the company’s ability to reverse its unfavorable operating trends. The firm has also warned that it could lower the company’s ratings if its leverage remains above 5.5% and cash flow deteriorates further.
Frontier’s Deteriorating Business Empire
Frontier Communications Corp (NASDAQ:FTR) finds itself in the current mess of deteriorating ratings on the back of a slow recovery in its service business. The company has also struggled to revitalize growth in its legacy fixed telephone business. A decline in access lines means the company will continue to struggle to generate desired revenues.
Management warnings that the company might continue to experience declines in wireless backhaul revenues raises serious concerns about the company’s long-term prospects. Exacerbating the situation are concerns that current partners might migrate to ethernet solutions at lower price points.
Frontier Communications Corp (NASDAQ:FTR) wireless backhaul business should continue to be a big headwind to the company’s earnings. The company’s residential voice segment also faces an uncertain future as customer numbers have recently declined by 3.2% to 4,736,000.
Intense competition from the likes of AT&T Inc. (NYSE:T) and T-Mobile US Inc (NASDAQ:TMUS) has forced the company to venture into the acquisition market as it seeks to bolster its offerings. However, the company is yet to feel the impact of the Verizon assets it acquired last year on its earnings.
Frontier Communications Corp (NASDAQ:FTR) stock was down by 4.76% in Tuesday’s trading session, ending the day at $1.40 a share.
I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. All information, or data, is provided with no guarantees of accuracy.
About the author: Marc has a degree in economics and a MSc. in Finance. Over his 20-year career, Marc has worked for global investment firms in Europe and the United States as an analyst, fund manager, and consultant.