Frontier Communications 2007 Annual Report Download - page 24

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
• Our ability to successfully renegotiate union contracts expiring in 2008 and thereafter;
• Our ability to pay a $1.00 per common share dividend annually, which may be affected by our cash
flow from operations, amount of capital expenditures, debt service requirements, cash paid for income
taxes (which will increase in the future) and our liquidity;
• The effects of fully utilizing our federal net operating loss carryforwards and AMT tax credit
carryforwards that were generated in prior years, which have significantly increased our cash taxes in
2007 and will continue to do so in 2008 and 2009;
• The effects of any future liabilities or compliance costs in connection with worker health and safety
matters; and
• The effects of any unfavorable outcome with respect to any of our current or future legal, governmental
or regulatory proceedings, audits or disputes.
Any of the foregoing events, or other events, could cause financial information to vary from management’s
forward-looking statements included in this report. You should consider these important factors, as well as the
risks set forth under Item 1A. “Risk Factors” above, in evaluating any statement in this Form 10-K or otherwise
made by us or on our behalf. The following information is unaudited and should be read in conjunction with the
consolidated financial statements and related notes included in this report. We have no obligation to update or
revise these forward-looking statements.
OVERVIEW
We are a full–service communications provider and one of the largest exchange telephone carriers in the
country. We offer our incumbent local exchange carrier (ILEC) services under the “Frontier” name. On July 31,
2006, we sold our competitive local exchange carrier (CLEC), Electric Lightwave, LLC (ELI). We accounted for
ELI as a discontinued operation in our consolidated statements of operations. On March 8, 2007, we completed
the acquisition of Commonwealth Telephone Enterprises, Inc., which includes a small CLEC component. This
acquisition expands our presence in Pennsylvania and strengthens our position as a leading full-service
communications provider to rural markets. On October 31, 2007, we completed the acquisition of Global Valley
Networks, Inc. and GVN Services which expands our presence in California and also strengthens our rural
position. As of December 31, 2007, we operated in 24 states with approximately 5,900 employees.
Competition in the telecommunications industry is intense and increasing. We experience competition from
many telecommunications service providers, including cable operators, wireless carriers, voice over internet
protocol (VOIP) providers, long distance providers, competitive local exchange carriers, internet providers and
other wireline carriers. We believe that as of December 31, 2007, approximately 58% of the households in our
territories are able to be served by alternate phone providers. We also believe that competition will continue to
intensify in 2008 across all of our products and in all of our markets. Our Frontier business experienced erosion
in access lines and switched access minutes in 2006 and 2007, primarily as a result of competition. Competition
in our markets may result in reduced revenues in 2008.
The communications industry is undergoing significant changes. The market is extremely competitive,
resulting in lower prices. These trends are likely to continue and result in a challenging revenue environment.
These factors could also result in more bankruptcies in the sector and, therefore, affect our ability to collect
money owed to us by carriers.
Revenues from data and internet services such as high-speed internet continue to increase as a percentage of
our total revenues and revenues from services such as local line and access charges (including Federal and state
subsidies) are decreasing as a percentage of our revenues. These factors, along with the potential for increasing
operating costs, could cause our profitability and our cash generated by operations to decrease.
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