Dear Mr. Berko: Frontier is an internet, wireline, broadband, satellite and video communications company trading at $4.75 and yielding 8.8 percent. It just bought a big piece of Verizon’s wireline business, and I think the company, with its high dividend, is attractive because its business is nearly recession proof. People always need communications.
— L.M., Kankakee, Ill.
Dear L.M.: A frontier is defined as a dividing line between two countries. And that dividing line is between Verizon, which is the good country, and Frontier, which is clearly the bad country.
Frontier Communications (FTR) now trades at $3.60 and yields 13 percent. In April, FTR completed its acquisition of Verizon’s voice, broadband and FiOS connections in California, Texas and Florida. Verizon got a check for $10.54 billion. Subsequently, FTR’s revenues for 2016 doubled, to $9.5 billion, but the company lost 10 cents a share. Customers are getting the shaft. The technical conversion from Verizon to FTR morphed into an abominable nightmare. FTR descended upon its newly acquired 3.7 million Verizon customers like a black sun. Within 24 hours, millions of broadband, wireline and video users lost touch with the world. Jumpin’ Jehosaphat, can you imagine the ensuing entropy in a four-kid household without phones, broadband and video for almost a month? FTR’s share price crashed from $5.75 to $3.10, and months after the merger ink dried, problems still persist, and it takes weeks getting a technician to repair the problem.
I wouldn’t touch FTR with the devil’s pitchfork. Frontier has a below-average safety ranking, worrisome financial strength, poor earnings predictability and, according to Value Line, a “weak Price Growth Persistence rating” of 17, with 100 being the highest. Management’s blundering attempts to convert 3.7 million Verizon customers into FTR’s service universe were a prodigious nightmare. And integrating 11,000 Verizon technicians with 19,000 Frontier technicians has become a technical Tower of Babel.
