Frontier Communications 2006 Annual Report Download - page 34

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Consolidated revenue increased $8.3 million, from $2.017 billion in 2005 to $2.025 billion in 2006.
Consolidated revenue decreased $5.3 million in 2005. The decrease in 2005 is primarily due to the sale in
2004 of our electric utility property, partially offset by an increase of $4.4 million in telecommunications
revenue. Our electric utility contributed $9.7 million of revenue in 2004.
In July 2006, we sold our CLEC segment (ELI) to Integra. As a result, we have reclassified ELI’s results of
operations as discontinued operations in our consolidated statements of operations and restated prior periods.
In June 2005, the FASB issued EITF No. 04-5, “Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain
Rights,” which provides new guidance on how general partners in a limited partnership should determine
whether they control a limited partnership. The Company has applied the provisions of EITF No. 04-5
retrospectively and consolidated Mohave for all periods presented.
On March 15, 2005, we completed the sale of our conferencing service business, CCUSA. As a result of the
sale, we have classified CCUSA’s results of operations as discontinued operations in our consolidated statement
of operations and restated prior periods.
Change in the number of our access lines is important to our revenue and profitability. We have lost access
lines primarily because of competition, changing consumer behavior, economic conditions, changing technology,
and by some customers disconnecting second lines when they add high-speed internet or cable modem service.
We lost approximately 111,000 access lines during 2006, but added approximately 75,100 high-speed internet
subscribers during this same period. We lost 98,800 residential customer lines and 12,200 non-residential
customer lines in 2006. The non-residential line losses were principally in Rochester, New York, while the
residential losses were throughout our markets. We expect to continue to lose access lines but to increase high-
speed internet subscribers during 2007. A continued loss of access lines, combined with increased competition
and the other factors discussed in MD&A, may cause our revenues, profitability and cash flows to decrease in
2007.
Telecommunications Revenue
2006 2005 2004
($ in thousands) Amount $ Change % Change Amount $ Change % Change Amount
Local services ............ $ 809,584 $(20,101) -2% $ 829,685 $(21,392) -3% $ 851,077
Access services ........... 427,959 (3,380) -1% 431,339 (25,589) -6% 456,928
Long distance services ..... 153,272 (16,224) -10% 169,496 (14,127) -8% 183,623
Data and internet services . . . 424,209 58,596 16% 365,613 51,835 17% 313,778
Directory services ......... 114,138 1,046 1% 113,092 2,469 2% 110,623
Other ................... 96,205 (11,611) -11% 107,816 11,202 12% 96,614
ILEC revenue ........ $2,025,367 $ 8,326 0% $2,017,041 $ 4,398 0% $2,012,643
Local Services
Local services revenue for the year ended December 31, 2006 decreased $20.1 million or 2%, as compared
with the prior year. Local revenue decreased $25.9 million primarily due to continued losses of access lines
partially offset by a local rate increase on some of our Rochester residential access lines effective August 2006.
2005 reflected a reserve of $4.0 million associated with a state rate of return limitation on earnings. Enhanced
services revenue increased $5.8 million, primarily due to sales of additional feature packages. Economic
conditions and/or increasing competition could make it more difficult to sell our packages and bundles and cause
us to lower our prices for those products and services, which would adversely affect our revenues and
profitability and cash flow.
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