Frontier Communications 2008 Annual Report Download - page 9

The recent severe contraction in the global financial markets and ongoing recession may be impacting
consumer behavior to reduce household expenditures by not purchasing our services and/or by discontinuing
our services. These trends are likely to continue and may result in a challenging revenue environment. These
factors could also result in increased delinquencies and bankruptcies and, therefore, affect our ability to collect
money owed to us by residential and business customers.
We employ a number of strategies to combat the competitive pressures and changes to consumer behavior
noted above. Our strategies are focused in the following areas: customer retention, upgrading and up-selling
services to our existing customer base, new customer growth, win backs, new product deployment, and
operating expense and capital expenditure reductions.
We hope to achieve our customer retention goals by bundling services around the local access line and
providing exemplary customer service. Bundled services include High-Speed Internet, unlimited long distance
calling, enhanced telephone features and video offerings. We tailor these services to the needs of our residential
and business customers in the markets we serve and continually evaluate the introduction of new and
complementary products and services, which can also be purchased separately. Customer retention is also
enhanced by offering one, two and three year price protection plans where customers commit to a term in
exchange for predictable pricing and/or promotional offers. Additionally, we are focused on enhancing the
customer experience as we believe exceptional customer service will differentiate us from our competition. Our
commitment to providing exemplary customer service is demonstrated by the expansion of our customer
services hours, shorter scheduling windows for in-home appointments and the implementation of call reminders
and follow-up calls for service appointments. In addition, due to a recent realignment and restructuring of
approximately 70 local area markets, those markets are now operated by local managers with responsibility for
the customer experience, as well as the financial results, in those markets.
We utilize targeted and innovative promotions to sell new customers, including those moving into our
territory, win back previously lost customers, upgrade and up-sell existing customers on a variety of service
offerings including High-Speed Internet, video, and enhanced long distance and feature packages in order to
maximize the average revenue per access line (wallet share) paid to Frontier. Depending upon market and
economic conditions, we may continue to offer such promotions to drive sales and may offer additional
promotions in the future.
Lastly, we are focused on introducing a number of new products that our customers desire, including
unlimited long distance minutes, bundles of long distance minutes, wireless data, internet portal advertising and
the “Frontier Peace of Mind” product suite. This last category is a suite of products aimed at managing the total
communications and personal computing experience for our customers. The Peace of Mind product and
services are designed to provide value and simplicity to meet our customers’ ever-changing needs. The Peace
of Mind product and services suite includes services such as an in-home, full installation of our high-speed
product, two hour appointment windows for the installation, hard drive back-up services, enhanced help desk
PC support and inside wire maintenance. We offer a portion of our Peace of Mind services, including hard
drive back-up services and enhanced help desk PC support, both to our customers and to other users inside and
outside of our service territories. Although we are optimistic about the opportunities provided by each of these
initiatives, we can provide no assurance about their long term profitability or impact on revenue.
We believe that the combination of offering multiple products and services to our customers pursuant to
price protection programs, billing them on a single bill, providing superior customer service, and being active
in our local communities will make our customers more loyal to us, and will help us generate new, and retain
existing, customer revenue.
Divestiture of Electric Lightwave, LLC
In 2006, we sold our CLEC business, Electric Lightwave, LLC (ELI) for $255.3 million (including the
sale of associated real estate) in cash plus the assumption of approximately $4.0 million in capital lease
obligations. We recognized a pre-tax gain on the sale of ELI of approximately $116.7 million. Our after-tax
gain on the sale was $71.6 million. Our cash liability for taxes as a result of the sale was approximately $5.0
million due to the utilization of existing tax net operating losses on both the federal and state level.
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES