Frontier Communications 2010 Annual Report Download - page 4

PART I
Item 1. Business
Frontier Communications Corporation (Frontier) is a communications company providing services
predominantly to rural areas and small and medium-sized towns and cities. Frontier and its subsidiaries are
referred to as the “Company,” “we,” “us” or “our” throughout this report. Frontier was incorporated in the state
of Delaware in 1935, originally under the name of Citizens Utilities Company, and was known as Citizens
Communications Company from 2000 until July 31, 2008.
Our mission is to be the leader in providing communications services to residential and business customers
in our markets. 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, data, internet, and
television services and products, some that are available ‘a la carte, and others that are available as bundled or
packaged solutions. We believe that our local management structure, superior 100% U.S.-based customer
service and innovative product positioning will continue to differentiate us from our competitors in the markets
in which we compete.
Highlights for 2010
•The Transaction
On July 1, 2010, Frontier acquired the defined assets and liabilities of the local exchange business and
related landline activities of Verizon Communications Inc. (Verizon) in Arizona, Idaho, Illinois, Indiana,
Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia and
Wisconsin and in portions of California bordering Arizona, Nevada and Oregon (collectively, the
Territories), including Internet access and long distance services and broadband video provided to
designated customers in the Territories (which we refer to as the Acquired Business). This transaction
(the Transaction or the Merger) was financed with approximately $5.2 billion of common stock
(Verizon shareholders received 678.5 million shares of Frontier common stock) plus the assumption of
approximately $3.5 billion principal amount of debt.
Frontier acquired approximately 4.0 million access lines in the Transaction. As a result, the Company is
the nation’s largest communications services provider focused on rural areas and small and medium-
sized towns and cities in 27 states, and the nation’s fifth largest Incumbent Local Exchange Carrier
(ILEC), with approximately 5.7 million access lines, 1.7 million broadband connections and 14,800
employees as of December 31, 2010.
Revenue was $3.8 billion in 2010. On a pro forma basis, assuming the Transaction had occurred on
January 1, 2010, our revenues would have been approximately $5.7 billion for the year ended December
31, 2010.
Based on the level of debt incurred and the additional cash flows resulting from the Transaction, our
capacity to service our debt has been significantly enhanced as compared to our capacity immediately
prior to the Merger, although our overall debt increased. At December 31, 2010, the ratio of our net debt
to adjusted operating cash flow (“leverage ratio”) was 2.98 times.
•Issuance of Debt Securities, Letter of Credit Facility and Credit Facility
On March 23, 2010, we entered into a $750.0 million revolving credit facility (the Credit Facility) that
became effective on July 1, 2010, concurrently with the closing of the Merger and the termination of the
Company’s previously existing revolving credit facility.
On April 12, 2010, and in anticipation of the Merger, the Verizon subsidiary then holding the assets of
the Acquired Business completed a private offering of $3.2 billion aggregate principal amount of senior
notes. Upon completion of the Merger on July 1, 2010, we entered into a supplemental indenture with
The Bank of New York Mellon, as Trustee, pursuant to which we assumed the obligations under the
senior notes. The senior notes consist of $500.0 million aggregate principal amount of Senior Notes due
2015, $1.1 billion aggregate principal amount of Senior Notes due 2017, $1.1 billion aggregate principal
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES