Frontier Communications 2013 Annual Report Download - page 3

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 United States.
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
(TV) services and products, some that are available on a standalone basis, 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.
Highlights for 2013
In 2013, we continued to improve our customer metrics and revenue trends while strengthening our
financial profile as follows:
•Broadband Net Additions
During 2013, we added approximately 112,250 net broadband subscribers (an increase of approximately
6.4%), which exceeded the total net additions for the last three years combined, bringing our total
number of broadband subscribers to 1,866,700 as of December 31, 2013. The net increase in broadband
subscribers contributed to our improved revenue performance. We continued to invest in network speed
and capacity to support our goal of attracting additional customers and increasing broadband
penetration. In 2013, our broadband availability increased by 167,000 new households, and we are now
able to offer broadband to over 6.4 million households as of December 31, 2013. During 2013 and 2012,
Frontier received a total of $71.9 million from the first round of the Federal Communications
Commission’s (FCC) Connect America Fund (CAF) Phase I and $57.6 million related to the second
round of CAF Phase I to support broadband deployment in unserved and underserved high-cost areas. In
January 2014, we received an additional $3.7 million. We spent $32.7 million and $4.8 million of these
funds on network expansion in 2013 and 2012, respectively, enabling 64,400 new households with
broadband.
•Improved Customer Metrics
Our rate of residential customer loss improved to 3% during 2013 as compared to 7% for 2012. We
believe that this improvement in customer retention is principally due to investments in our network, our
local engagement strategy, improved customer service and the introduction of our standalone Simply
Broadband product. In addition to our increase in broadband subscribers, we added over 38,700 net
video subscribers during 2013.
Our average monthly residential revenue per customer in 2013 improved by $0.97, or approximately
2%, to $59.30, as compared to the prior year. Our average monthly business revenue per customer in
2013 improved by $14.13, or approximately 2%, to $653.26, as compared to the prior year.
•Strengthened Balance Sheet and Financial Profile
In April 2013, we raised $750.0 million in a registered debt offering of 7.625% senior unsecured notes
due 2024. We used the net proceeds, together with cash on hand, to finance cash tender offers, and
otherwise retire and repurchase debt in the aggregate principal amount of $1,563.0 million during the
year. These actions have enabled us to reduce our debt maturities in 2014, 2015 and 2016 to $257.9
million, $259.8 million and $345.5 million, respectively, which we believe can be funded from net cash
provided by operating activities during each of the next three years.
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES