Frontier Communications 2011 Annual Report Download - page 23

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
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The potential significant negative consequences on our financial condition and results of operations that could
result from our substantial debt include:
• limitations on our ability to obtain additional debt or equity financing;
• instances in which we are unable to meet the financial covenants contained in our debt agreements or to
generate cash sufficient to make required debt payments, which circumstances have the potential of
accelerating the maturity of some or all of our outstanding indebtedness;
• the allocation of a substantial portion of our cash flow from operations to service our debt, thus reducing
the amount of our cash flow available for other purposes, including operating costs, capital expenditures
and dividends that would otherwise improve our competitive position, results of operations or stock price;
• requiring us to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable
terms, to meet payment obligations;
• compromising our flexibility to plan for, or react to, competitive challenges in our business and the
communications industry; and
• the possibility of our being put at a competitive disadvantage with competitors who do not have as much
debt as us, and competitors who may be in a more favorable position to access additional capital
resources.
In addition, our senior notes are rated below “investment grade” by independent ratings agencies. This can result
in higher borrowing costs for us. We cannot assure you that these rating agencies will not lower our current debt ratings, if
in the rating agencies’ judgment, such an action is appropriate. A lowering of a rating may further increase our future
borrowing costs and reduce our access to capital.
We will require substantial capital to upgrade and enhance our operations.
The Acquired Business’ historical capital expenditures, excluding expenditures relating to the fiber-to-the-home
network, were significantly lower than our level of capital expenditures for our legacy operations when compared on a per
access line basis. Replacing or upgrading our infrastructure will require significant capital expenditures, including any
expected or unexpected expenditures necessary to make replacements or upgrades to the existing infrastructure of the
Acquired Business. If this capital is not available when needed or required as a result of the regulatory approval process in
connection with the Transaction, our business will be adversely affected. Responding to increases in competition, offering
new services, and improving the capabilities of, or reducing the maintenance costs associated with, our plant may cause our
capital expenditures to increase in the future. Accelerated losses of access lines, the effects of increased competition, lower
subsidy and access revenues and the other factors described above may reduce our cash generated by operations and may
require us to increase capital expenditures.
We cannot assure you that we will be able to continue paying dividends.
Effective February 16, 2012, our Board of Directors set the annual cash dividend at $0.40 per share, a reduction
from our prior dividend level of $0.75 per share. However, the amount and timing of future dividend payments is subject to
applicable law and will be made at the discretion of our Board of Directors based on factors such as cash flow and cash
requirements, capital expenditure requirements, financial condition and other factors.