Frontier Communications Corporation (NYSE:FTR) is among the worst performers over the last three consecutive years. It is the provider of phone, Internet, and other data transport services to customers in 29 states. Its share price was hammered by increasing market competition and technological innovations that have strongly affected its revenue base and earnings potential.
FTR stock price crashed from $109 a share just three years ago to around $7 a share at present. Frontier Communications shares have the 52-week trading range of $6.08 – $32.85, with the market cap of $650 million.
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Higher Debt Limits Frontier Communications Upside
The company has suspended its dividends, amid lower cash generation potential and the threat to liquidity position. Frontier’s debt was at $17 billion at the end of the last year, and its annual interest expense stands around $1.5 billion. Interest expense significantly hurts its earning potential. Frontier posted the loss of $1.8B last year despite tax benefit of $830 million.
The company has been working on different strategies to reduce its debt burden. It achieved close to $190 million in annual cost savings. The dividend suspension will also allow it to generate $250 million annually to for debt reduction.
“As we implement our strategy, our board regularly evaluates the optimal long-term capital allocation for the business, and has voted to suspend the dividend on common shares,” CEO said.
The company also plans to sell its non-core businesses to support its liquidity position. It recently announced it would sell the landline business that it bought from Verizon two years ago for more than 10 billion. Its landline revenue has been declining at a steady rate over the previous five consecutive quarters.
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The company’s revenue base could get a big hit, amid the potential sale of landline businesses and lower investments in growth opportunities. Therefore, analysts believe Frontier share price to remain under pressure over the following quarters.
Featured Image: frontier.com
