Frontier Communications eyes going to market midyear to fund $2 billion AT&T asset purchase

By Lisa Kerner

Charlotte, N.C., March 19 - Frontier Communications Corp. senior vice president and treasurer Robert Starr addressed questions regarding the company's proposed acquisition of certain AT&T, Inc. assets and use of free cash at the Goldman Sachs TMT Leveraged Finance Conference on Wednesday in New York.

In December, Frontier announced a definitive agreement with AT&T, Inc. to acquire AT&T's wireline business and statewide fiber network that provides services to residential, commercial and wholesale customers in Connecticut. Frontier will pay $2 billion in cash for the business and related assets, which include AT&T's U-verse video and satellite TV customers in Connecticut.

Starr said the AT&T transaction was a matter of the "right place, right time, (and the) right set of assets."

Frontier expects to go to the market in the "May-June timeframe" for funding and plans to close the transaction by the end of 2014.

The timing of going to the market "is a balancing act," said Starr, adding that the company has yet to decide on particular financing. "The markets are in good shape, and we think that there's plenty of appetite for our paper right now."

Debt preference and leverage

When asked about Frontier's preference for unsecured and non-callable debt, Starr said the company likes a "very simple straightforward capital structure." He also likes the covenants and flexibility to move assets around.

"So, that's what we've been doing, and I think we are going to stick with that," said Starr.

Regarding balance sheet parameters and leverage, Frontier's basic objective is to reduce leverage over time, according to Starr.

"It (leverage)'s going up about point four (0.4) turns for this acquisition, and we think with the additional free cash flow it generates, it's going to enable us to delever going forward," Starr said. "We don't have any specific targets for what leverage should or shouldn't be."

Frontier's capital allocation policy remains unchanged, according to Starr.

The first use of free cash flow is to invest in the network, followed by protecting the dividend and then using residual free cash flow to deleverage.

Business priorities

Starr said the company made "great progress" in 2013 in driving broadband penetration in the residential markets through all four quarters.

"That has helped us increase our data revenue, and that helps offset some declines in the voice revenue," he said.

The goal has been to change the revenue trajectory, and Frontier is making "great improvements" in that respect, according to Starr.

And while Frontier considers acquisition opportunities that are brought to its table, the current focus is on closing the AT&T transaction.

Looking ahead, Starr said Frontier wants to continue to drive broadband penetration in 2014 and to reduce churn.

Frontier is a Stamford, Conn.-based telecommunications company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.