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FTR - Frontier Communications


Myth465
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Here is an outstanding Q&A with Frontier's Management team.

 

http://cc.talkpoint.com/ubsx001/120610a_lv/?entity=35_0BKEY67

 

She is fast becoming one of my favorite non investor CEOs and is easily the best Woman CEO I have come across.

 

Either she knows what the hell she is talking about or is an expert at bull shitting.

 

 

I will post my writeup later in the week, should I get around to it.

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  • 2 months later...

Results. I still hold my leap position and am underwater 35%. A small move down makes a huge difference. A small move up should do the same ....

 

I look forward to the call.

 

http://www.businesswire.com/news/home/20110223005766/en/Frontier-Communications-Reports-2010-Fourth-Quarter-Full

 

Frontier Communications Reports 2010 Fourth Quarter and Full Year Results

 

• Increased broadband availability to 240,000 new households in the quarter

 

• Sequential quarterly improvement of high-speed internet subscriber growth

 

• Improved residential customer churn, revenue per customer and products per customer

 

• Strong commercial sales winbacks, including over 100 businesses in West Virginia

 

• Fourth quarter operating cash flow margin of 46%; 49% for the full year; as adjusted

 

• 2010 full year dividend payout ratio of 63% of free cash flow

 

-----

 

Free cash flow, as defined by the Company in the attached Schedule A, was $212.9 million for the fourth quarter of 2010 and $838.3 million for the full year of 2010. The Company’s dividend represents a payout of 63 percent of free cash flow for the full year of 2010.

 

For the full year of 2011, the Company’s expectations for capital expenditures and free cash flow, excluding acquisition/integration costs and capital expenditures, to be within a range of $750 million to $780 million and $1.15 billion to $1.2 billion, respectively. We expect that in 2011 our cash taxes will be approximately $50 million to $75 million.

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  • 2 weeks later...

I like that she and some of the other executives own quite a bit of stock. I'm gonna take a look at this one further too.

 

the jan 2013 $10 are trading for like .30. I know the dividend is crucial, but, man...at first glance, that looks tempting.

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I like that she and some of the other executives own quite a bit of stock. I'm gonna take a look at this one further too.

 

the jan 2013 $10 are trading for like .30. I know the dividend is crucial, but, man...at first glance, that looks tempting.

 

I own the $10 leaps and am down 55%. I would sell and rebuy $7.50 leaps but its in a Roth. I plan to buy more sooner or later. Probably after or during the correction, and after I can dig into the numbers. A small move up or down makes a huge impact on the leaps so be sure you can stomach it either way.

 

I love Leaps on High Yield. Similar to ROIC, this should be a home run should they be able to successfully integrate and interest rates stay low. Management is doing all the right things inmo.

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I enjoyed the interview that she had with Cramer. I was impressed as well when I started digging into their financials and acquired some options as well.

 

Great find Myth!

 

Im a thief at heart, thank the FFH team. I like Management alot. The quarter was good, just wish I bought more in the 7s. If we dip down again, I plan to double down. If one gets 2014 leaps in August / September then you could have a monster dividend machine when it comes time to exercise those. It looks like we will be digesting / paying down debt over the next 2 years. Hopefully the debt paydown gets reflected with increases in the share price. $15, would be lovely in 2 to 3 years.

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Agree ,

 

They are shareholder friendly oriented. Some 'rural' telecom company like this one are going big on FTTH. They spend like crazy but the return won't be that good (though this will assured recurring revenue long term).

Frontier has decided to stay in Dsl and Voice. Right now they enjoy stable and fat FCF. Revenue seems to be declining 1%/year, but this is offset by cost reduction. Longer term, FCF probaly would decline.

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  • 3 weeks later...

http://www.myfoxboston.com/dpps/news/us-population-leaves-heartland-behind-dpgonc-20110411-fc_12717483

 

This should be accessible to NON-WSJ members, there have been a number of articles about this in the WSJ.  The populations of rural area's seem to be stagnant or declining.  Does this concern you at all?  Do you have any confidence that the revenues will grow again or are you just hoping the paydown in debt stays ahead of the revenue decline?

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I caved. Bought some 7.50s. A very conservative $9 in 2013 yields 50% returns. If we have deflation this will work out well. $10 gives us 150%. Its a fairly small position, which could deliver great returns at $10 - $12.

 

They will have paid out about 9% a year in dividends.. do you think that they will reach $9 if they pay out $1.5 in dividends?

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Right now they are trying to stabilize Spinco, so half of the CF is going to dividends and the other half is going to capex for integration and broad band buildout. Once they are a bit more stable and have broadband built out a bit more capex will fall. They will use the remaining cashflow to reduce debt to their desired metric. After that they will raise the dividend or perhaps buy back shares. As they reduce debt ideally the EV should remain the same pushing up the share price....

 

Deflation helps with the thesis.

 

---

 

Shane I dont look for revenue growth. I just hope that broadband covers wired disconnects. Also want Capex to fall, debt to fall, and interest payments to fall increasing FCF and dividends.

 

I plan to perform my Q1 updates and will likely buy more leaps. They were working quite well. I want to establish a trading position because it seems that we build until the dividend and then sell off. The market being down doesnt help...

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Earlier today I just doubled my position in FTR based on the Q1 2011 results and future guidance...The dividend payout ratio is around 74% and at the current price has a dividend yield of 9.5%!!!! 

 

Myth - The current leverage ratio is 3x and management wants to reduce it to 2.5x's. This target should be achieved in 2013 and I would love to see a large scale share repurchase program along with a possibly bump in the dividend back to $1/share. 

 

Right now they are trying to stabilize Spinco, so half of the CF is going to dividends and the other half is going to capex for integration and broad band buildout. Once they are a bit more stable and have broadband built out a bit more capex will fall. They will use the remaining cashflow to reduce debt to their desired metric. After that they will raise the dividend or perhaps buy back shares. As they reduce debt ideally the EV should remain the same pushing up the share price....

 

Deflation helps with the thesis.

 

---

 

Shane I dont look for revenue growth. I just hope that broadband covers wired disconnects. Also want Capex to fall, debt to fall, and interest payments to fall increasing FCF and dividends.

 

I plan to perform my Q1 updates and will likely buy more leaps. They were working quite well. I want to establish a trading position because it seems that we build until the dividend and then sell off. The market being down doesnt help...

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I just did my update today. I bought a few more leaps but nothing major. I want to hold some capital, and am out of room in my Roth. I really like this idea. My new plan is to continually roll over in the money $7.50 leaps. At some point they will raise the dividend and at the end of the process I can decide to exercise the position or sell for capital gains.

 

Also Capex is 15% of revenue and will drop to around 11%. 2013 should be interesting.

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  • 1 month later...

I re listened to the Q1 2011 earning conference call and there are numerous growth areas:

 

Data centre space:

 

-Currently hosting in larger markets (rochester)

-looking to see if it makes sense to buy datacentres (very costly) to provice cloud capabilities or organically grow services

-Already have hosting facilities and have additional facilities through acquisition

-If they want to grow in this area, there is a high possibility of a partnership as they have with DirectTV with sat service

 

Wifi:

 

-Over a dozen mesh municiple builds

-over 500 hot spots (390 anchors in college, uni, hospitals etc and locked into long term 3-5 year contracts)

-focusing on making every home a hot spot (legacy and now acquired properties)

 

FTR's goals remain the same:  Job 1 - Integration, Job 2 - Increase product suites

 

Overall, I am very happy with the progression and the long term future!!! At a 9%+ dividend with a plan to increase it in the future, how can you really go wrong? I am debating once again if I should continue to add to my position.

 

Thanks,

 

S

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  • 2 weeks later...

For Canadians, FTR seems like a good play on the C$ as well as a good dividend producing company.

 

FTR has been on my radar for several years but every time I started thinking seriously about it the share price was in the $8.50-9.00 range. Now, with it at $7.65, it is starting to look pretty attractive, especially for Canadians with the exchange rate nearing 6%.

 

I have no idea of where the exchange rate will settle out but I am reasonably sure that the Bank of Canada will try to keep it within reasonable sight of parity for the foreseeable future. If we have an interest rate increase, I suspect most of that has already been built in. There is also the possibility of a slide back if the US settles their present spending debate in the next week or so.

 

However, presently I am watching the combined effect that the present US spending debate may have on both the markets (& FTR) and the C$. If it drives the C$ up further and the markets down there could be an opportunity here.

 

So combine the strong C$, and FTR presently yielding nearly 10% and reasonable upside share price potential, there are probably worse places to be. 

 

I bought some at $7.70 yesterday which translated into $7.40 C$ when it was posted to my account after exchange. I plan on picking up some more if FTR goes lower and/or C$ goes higher.

 

 

 

 

 

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I could not help myself either and doubled my position today as well.  FTR is starting to become a rather large holding in my portfolio but how can you go wrong with a 10%+ yield? 

 

picked up (added) 2% position at $7.50, should drop 10-20% now for those of you looking at this

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I am sure  there is lots that can go wrong.

 

There is no free lunch. There are a lot of smart people out there.

 

Be careful, don't put too many eggs in this basket.

 

I am hoping that the decreasing market prices are related to people selling(indiscrimately? hopefully) to raise cash in fear of debt ceiling + budget problems.

 

I am hoping that no matter what happens with the macro fears that people will still want there telephone service from FTR. If there is inflation they will be able to raise prices.

 

They have a lot of debt, but not a lot expiring over the next couple years.

 

What  do others ,who have posted here, see re risk?

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The population of the rural area's FTR services in declining, so there isn't much hope for long-term growth in their revenue.  This could leave the price lagging.  I think the yield will eventually tempt people though.

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