Frontier Communications 2006 Annual Report Download - page 4

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
PART I
ITEM 1. BUSINESS
Citizens Communications Company (Citizens) and its subsidiaries 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. Revenue from our Frontier operations was $2.025 billion
in 2006. Among the highlights for 2006:
•Proposed Acquisition
On September 17, 2006, we entered into a definitive agreement to acquire Commonwealth Telephone
Enterprises, Inc. (Commonwealth). Total consideration (cash and stock) to be paid is approximately
$1.2 billion. We expect to close this transaction in the first half of 2007.
•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. In 2006, we sold our competitive local exchange carrier (CLEC), Electric Lightwave, LLC,
or ELI (including the sale of associated real estate), for approximately $255 million in cash. We also
received approximately $65 million from the dissolution of the Rural Telephone Bank.
•Stockholder Value
During 2006, we repurchased $135.2 million of our common stock and we continued to pay an annual
dividend of $1.00 per common share.
•Growth
During 2006, we added approximately 75,100 new high-speed internet customers and almost 88,200
customers began buying a bundle or package of our services. At December 31, 2006, we had
approximately 393,200 high-speed data customers and almost 517,700 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 2006 we had approximately 62,900 customers.
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, 2006, we operated as an incumbent local exchange carrier in 23 states.
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.
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 and
Analysis of Financial Condition and Results of Operations (MD&A), we operate in an increasingly challenging
environment and, accordingly, our Frontier revenues have been growing only slightly.
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