Frontier Communications 2011 Annual Report Download - page 5

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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
2
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 in the U.S. 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
á la carte, and others that are available as bundled or packaged solutions. We believe that our local management structure,
100% U.S.–based customer service workforce and innovative product positioning will continue to differentiate us from our
competitors in the markets in which we compete.
Highlights for 2011
• The Transaction - Update
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) 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, operating in 27 states, and the nation’s fourth largest Incumbent Local Exchange Carrier (ILEC), with
approximately 5.3 million access lines, 1.8 million broadband connections and 15,400 employees as of December
31, 2011.
In October 2011, the Company converted all operating systems in four states of the Acquired Business to our
legacy systems and converted all of the remaining nine Acquired Business states onto the Company’s legacy
financial, human resources and engineering systems. In March 2012, the Company expects to commence the
conversion of the other operating systems in the remaining nine states of the Acquired Business onto the
Company’s legacy systems. The completion of the conversions will significantly enhance the Company’s ability
to manage the business and further reduce costs. The integration of the West Virginia operations of the Acquired
Business was successfully completed prior to the closing of the Transaction.
Based on current estimates and assumptions, we expect that our annualized cost savings will reach approximately
$650 million by the end of 2012. Our 2011 savings from our targeted initiatives list (which includes, but is not
limited to, network cost savings, contractor reductions, cancellation or reduction of vendor services, benefit
changes and real estate savings) was approximately $156 million, or $248 million on an annualized basis, and
combined with the savings achieved in 2010, equates to an annualized cost savings run rate of approximately
$552 million as of the end of 2011.
• Bank Financing
On October 14, 2011, the Company entered into a five-year $575 million senior unsecured term loan facility with
a final maturity of October 14, 2016. The entire facility has been drawn and proceeds of $473 million were used
to repay in full the remaining outstanding principal on three debt facilities, with the remainder available for
general corporate purposes.