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The Wires Are Unraveling for Verizon’s Landline Buyer

Jul 08, 2017

It was less than 18 months ago that the telecom company Frontier Communications acquired Verizon’s wired voice and data operations in Texas, Florida, and California.

The move was aggressively counterintuitive—a bold bid for growth through landlines at a time when many of its peers were looking to opportunities in the fast-growing wireless category.

Months later, it has proven to be more of a blunder.

In 2016 Frontier lost $373 million, nearly twice its 2015 losses of $196 million, a product of revenue declines across the company. Add to that debt of more than $17 billion, the result of its landline shopping spree and more than triple the amount of debt the company had a decade ago, and it's a grim picture for a company so willing to buck industry trends.

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A Wall Street Journal report published Saturday details how the Norwalk, Conn. company has tried to stem the bleeding ahead of looming debt payments. Frontier has dramatically cut costs, which led to service outages and marketing shortfalls that in turn drove some customers away. It slashed its dividend and plans for a 1-for-15 reverse stock split.

But sharp subscriber losses, especially in the face of stiff competition that's investing rather than cutting, are making it even more difficult for Frontier to bounce back.

It's hardly the only telecom company that bought Verizon assets only to face going bust. Similar stories played out for FairPoint Communications in 2009 (it declared bankruptcy) and Hawaiian Telcom (ditto) in 2008.

And to be fair, Frontier is fighting back. Customer losses have slowed and it recently hired Chris Levendos, the former head of the Network Deployment and Operations group at Alphabet's Google Fiber.

But it will be a long road for Frontier to squeeze the value out of the fiber networks it saw as its future, particularly at a time when more customers look to wireless services for their network needs. Among the options? A very affordable unlimited plan from—yep, you guessed it—Verizon.

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