Frontier Communications 2012 Annual Report Download - page 3

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PART I
Item 1. Business
Frontier Communications Corporation (Frontier) is the largest 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, 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 engagement structure, 100% U.S.-based workforce and innovative product
positioning will continue to differentiate us from our competitors in the markets in which we compete.
In 2012, we completed the integration of our July 2010 acquisition of properties from Verizon
Communications Inc. (Verizon), an acquisition that tripled the size of the Company and is described in more
detail below. Additionally, we undertook the following significant steps in 2012 to position the Company for
the future:
•Broadband Expansion
During 2012, we expanded our broadband availability to 318,000 new households, bringing our total of
new available households to 973,000 since the July 2010 acquisition. As of December 31, 2012, we are
able to offer broadband to over 6.2 million households. During 2012 and early 2013, Frontier received
$66.0 million and $5.9 million, respectively, or a total of $71.9 million, from the Connect America Fund
(CAF) to support broadband deployment in unserved high-cost areas. As of December 31, 2012, we had
broadband in excess of 1 Mbps available to 88% of the households in our territory, in excess of 3 Mbps
available to 83% of the households in our territory, in excess of 6 Mbps available to 74% of the
households in our territory, and in excess of 20 Mbps available to 40% of the households in our
territory.
•Systems Conversion
In March 2012, the Company successfully completed the conversion of all of its network and systems
from the July 2010 acquisition onto one platform, ten months ahead of schedule. The completion of the
conversions enhanced the Company’s ability to manage the business and further reduce costs. Following
the completion of the conversions, the Company is focused on simplifying its processes, eliminating
redundancies and further reducing its cost structure while continuing to improve its customer service
capabilities.
•Improved Residential Customer Metrics
During 2012, our rate of residential customer loss improved to 7.0% for the full year of 2012 as
compared to 9.9% for 2011. We believe that these improvements in customer retention are principally
due to our investments in our network, our local engagement strategy, improved customer service and
the introduction of our stand alone Simply Broadband product, as well as customer recognition of the
value of our products, services and bundled options, fewer residential moves out of territory, fewer
moves by businesses to competitors and our ability to compete with cable telephony in a maturing
market place.
•Cost Reductions
We have fully achieved our acquisition cost savings synergy target of $650 million as of the end of
2012. The cost savings in 2012 from our targeted initiatives list (which includes, but is not limited to,
cancellation or reduction of vendor services, network cost savings, contractor reductions, benefit
changes and real estate savings) was approximately $25 million on a quarterly basis, or $101 million on
an annualized basis, and combined with the savings achieved in 2011 and 2010, equates to an
annualized cost savings run rate of $653 million as of the end of 2012.
2
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES