Frontier Communications 2010 Annual Report Download - page 18

We may be unable to grow our revenues and cash flows despite the initiatives we have implemented.
We must produce adequate revenues and cash flows that, when combined with funds available under our
revolving credit facility, will be sufficient to service our debt, fund our capital expenditures, pay our taxes, fund
our pension and other employee benefit obligations and pay dividends pursuant to our dividend policy. We
have identified some potential areas of opportunity and implemented several growth initiatives, including
increasing marketing promotions and related expenditures and launching new products and services with a
focus on areas that are growing or demonstrate meaningful demand, such as wireline and wireless HSI, satellite
video products and the “Frontier Peace of Mind” suite of products, which includes computer technical support.
We cannot assure you that these opportunities will be successful or that these initiatives will improve our
financial position or our results of operations.
Weak economic conditions may decrease demand for our services.
We could be sensitive to the ongoing economic uncertainty if current economic conditions or their effects
continue. Downturns in the economy and competition in our markets could cause some of our customers to
reduce or eliminate their purchases of our basic and enhanced services, HSI and video services and make it
difficult for us to obtain new customers. In addition, if current economic conditions continue, our customers
may delay or discontinue payment for our services or seek more competitive pricing from other service
providers.
Disruption in our networks, infrastructure and information technology may cause us to lose customers
and incur additional expenses.
To attract and retain customers, we must provide customers with reliable service. Some of the risks to our
networks, infrastructure and information technology include physical damage, security breaches, capacity
limitations, power surges or outages, software defects and other disruptions beyond our control, such as natural
disasters and acts of terrorism. From time to time in the ordinary course of business, we experience short
disruptions in our service due to factors such as cable damage, theft of our equipment, inclement weather and
service failures of our third-party service providers. We could experience more significant disruptions in the
future. We could also face disruptions due to capacity limitations if changes in our customers’ usage patterns
for its HSI services result in a significant increase in capacity utilization, such as through increased usage of
video or peer-to-peer file sharing applications. Disruptions may cause interruptions in service or reduced
capacity for customers, either of which could cause us to lose customers and incur additional expenses, and
thereby adversely affect our business, revenues and cash flows.
Our business is sensitive to the creditworthiness of our wholesale customers.
We have substantial business relationships with other telecommunications carriers for whom we provide
service. While bankruptcies of these carriers have not had a material adverse effect on our legacy business or
the Acquired Business in recent years, future bankruptcies in the industry could result in the loss of significant
customers by us, as well as cause more price competition and uncollectible accounts receivable. Such
bankruptcies may be more likely in the future if current economic conditions continue through 2011 or beyond.
As a result, our revenues and results of operations could be materially and adversely affected.
A significant portion of our workforce is represented by labor unions and is therefore subject to
collective bargaining agreements; if we are unable to enter into new agreements or renew existing
agreements before they expire, our workers subject to collective bargaining agreements could engage in
strikes or other labor actions that could materially disrupt our ability to provide services to our customers.
As of December 31, 2010, we had approximately 14,800 active employees. Approximately 9,500, or 64%,
of these employees were represented by unions and were therefore subject to collective bargaining agreements.
Of the union represented employees as of December 31, 2010, approximately 2,300, or 24%, were subject to
collective bargaining agreements that expire in 2011 and approximately 2,800, or 29%, were subject to
collective bargaining agreements that expire in 2012.
We cannot predict the outcome of negotiations of the collective bargaining agreements covering our
employees. If we are unable to reach new agreements or renew existing agreements, employees subject to
collective bargaining agreements may engage in strikes, work slowdowns or other labor actions, which could
materially disrupt our ability to provide services. New labor agreements or the renewal of existing agreements
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES