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Frontier Clears AT&T Biz Buyout Hurdle

Zacks Equity Research

Frontier Communication (FTR) announced the early termination of waiting period related to AT&T’s Inc. (T) Wireline business acquisition under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. With the early expiry, the company is now has nearing the closure of the acquisition. The deal is subject to pending approvals from Federal Communications Commission and the Connecticut Public Utilities Regulatory Authority.

The transaction is expected to include the sale of 900,000 voice connections in Connecticut. This includes U-verse Voice over IP and traditional voice services. In addition, AT&T will also provide Frontier with its approximately 415,000 broadband connections in the region, which would incorporate 245,000 U-verse and 70,000 DSL customers. The accusation will not only help in providing significant financial synergies for Frontier but also in fending off competition from other wireline service providers like Telephone & Data Systems Inc. (TDS).

In addition, Frontier will also have access to AT&T’s 180,000 U-verse video subscribers. Moreover, AT&T will transfer its 2,700 employees managing its Connecticut operations to Frontier as the deal closes.

Apart from AT&T’s Wireline acquisition, we remain optimistic on Frontier’s collaborations with other companies to offer differentiated products to complement customers’ needs. In January, the company entered into a deal with TRG Customer Solutions. Per the agreement, Frontier Communications will offer three of its Frontier Secure products, namely comprehensive computer security, cloud-based unlimited backup, and sharing and proactive identity protection to TRG.

Further, the company has tie ups with various SMEs, educational institutions and hospitals to promote its CPE (customer premises equipment) that contribute approximately 9% to its revenues. The company has also collaborated with a major technology protection company – Asurion. Through this transaction, Frontier Secure extends extensive equipment protection to residential and small business customers. About one fourth of Frontier’s broadband customers subscribe to Secure which provides a strong revenue opportunity as it increases customers’ online interaction.

Frontier currently retains a Zacks Rank #3 (Hold).

Other Stocks

Better-ranked stock in this category include Cbeyond, Inc. (CBEY), which has a Zacks Rank #2 (Buy).

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