Frontier Communications 2005 Annual Report Download - page 5

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CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
PART I
ITEM 1. BUSINESS
Citizens Communications Company and its subsidiaries (Citizens) will be referred to as the “Company,” “we,”
“us” or “our” throughout this report. Citizens was incorporated in the state of Delaware in 1935 as Citizens Utilities
Company.
We are a communications company providing services to rural areas and small and medium-sized towns and
cities. We offer our services under the “Frontier” name. In addition, we provide competitive local exchange carrier,
or CLEC, services to business customers and to other communications carriers in certain metropolitan areas in the
western United States through Electric Lightwave, LLC, or ELI, our wholly-owned subsidiary. Revenue from our
Frontier and ELI operations was $2,003.3 million and $159.2 million, respectively, in 2005. In February 2006, we
entered into a definitive agreement to sell ELI and we expect the sale to close in the third quarter of 2006. Among
the highlights for 2005:
• Cash Generation
We continued to grow free cash flow through further growth of broadband and value added services,
productivity improvements, and a disciplined capital expenditure program that emphasizes return on
investment.
• Stockholder Value
During 2005, we repurchased $250.0 million of our common stock and we continued to pay an annual
dividend of $1.00 per common share. The share repurchase program was completed during the fourth
quarter of 2005.
• Growth
During 2005, we added approximately 99,000 new high-speed internet customers and almost 84,000
customers began buying a bundle or package of our services. At December 31, 2005, we had more than
311,000 high-speed data customers and almost 442,000 customers buying a bundle or package of services.
During 2005, we also began offering a television product in partnership with Echostar’s DISH Network,
and at the end of 2005 we had approximately 32,000 customers buying a “triple play” package of telephone,
television and high-speed internet service.
Our objective is to be the leading provider of communications services to homes and businesses in our service
areas. We are committed to delivering innovative and reliable products and solutions with an emphasis on convenience,
service and customer satisfaction. We offer a variety of voice, television and internet services that are available as
bundled or package solutions or, for some products, a la carte. We believe that superior customer service and
innovative product positioning will continue to differentiate us from our competitors in the marketplace.
TELECOMMUNICATIONS SERVICES
As of December 31, 2005, we operated incumbent local exchange carriers in 23 states. Our CLEC services consist
of a variety of integrated telecommunications products.
Frontier is typically the dominant incumbent carrier in the markets we serve and provides the “last mile” of
telecommunications services to residential and business customers in these markets. As a CLEC, we provide
telecommunications services to businesses and other carriers in competition with the incumbent. As a CLEC, we
frequently obtain the “last mile” access to customers through arrangements with the applicable incumbent. Frontier and
ELI are subject to different regulatory frameworks of the Federal Communications Commission (FCC). ELI does not
compete with our Frontier business.
The telecommunications industry is undergoing significant changes and difficulties and our financial results
reflect the impact of this challenging environment. As discussed in more detail in Management’s Discussion &
Analysis of Financial Condition and Results of Operations (MD&A), we operate in an increasingly challenging
environment and our Frontier revenues have not been growing.