Frontier Communications 2014 Annual Report Download - page 22

increasing competition, changing technology and consumer behavior (such as wireless displacement of
wireline use, e-mail use, instant messaging and increasing use of VoIP), technology and regulatory
constraints. We will likely continue to experience further reductions in the future. These factors, among
others, are likely to cause our local network service, switched network access, long distance and
subsidy revenues to continue to decline, and these factors may cause our cash generated by
operations to decrease.
We face intense competition.
The communications industry is extremely competitive. Through mergers and various service
expansion strategies, service providers are striving to provide integrated solutions both within and
across geographic markets. Our competitors include competitive local exchange carriers, Internet
service providers, wireless companies, VoIP providers and cable companies, some of whom may be
subject to less regulation than we are, that may provide services competitive with the services that we
offer or intend to introduce. We also believe that wireless and cable telephony providers have
increased their penetration of various services in our markets. We expect that competition will remain
robust. Our revenue and cash flow will be adversely impacted if we cannot reverse our customer
losses or continue to provide high-quality services.
We cannot predict which of the many possible future technologies, products or services will be
important in order to maintain our competitive position or what expenditures will be required to develop
and provide these technologies, products or services. Our ability to compete successfully will depend
on the success of capital expenditure investments in our properties, in addition to our new marketing
efforts, our ability to anticipate and respond to various competitive factors affecting the industry,
including a changing regulatory environment that may affect our business and that of our competitors
differently, new services that may be introduced, changes in consumer preferences, demographic
trends, economic conditions and pricing strategies by competitors. Increasing competition may reduce
our revenues and increase our marketing and other costs as well as require us to increase our capital
expenditures and thereby decrease our cash flows.
We may not realize the expected cost synergies from the Connecticut Acquisition.
The Company is devoting a significant amount of time and attention to the Connecticut operations
acquired from AT&T. The success of the Connecticut Acquisition will depend, in part, on our ability to
realize anticipated cost synergies. Even though the Company has integrated the acquired businesses
and operations successfully, this integration may not result in the realization of the full benefits of the
cost synergies that Frontier currently expects within the anticipated time frame or at all.
Some of our competitors have superior resources, which may place us at a cost and price
disadvantage.
Some of our competitors have market presence, engineering, technical, marketing and financial
capabilities, substantially greater than ours. In addition, some of these competitors are able to raise
capital at a lower cost than we are able to. Consequently, some of these competitors may be able to
develop and expand their communications and network infrastructures more quickly, adapt more swiftly
to new or emerging technologies and changes in customer requirements, take advantage of acquisition
and other opportunities more readily and devote greater resources to the marketing and sale of their
products and services than we will be able to. Additionally, the greater brand name recognition of some
competitors may require us to price our services at lower levels in order to retain or obtain customers.
Finally, the cost advantages of some of these competitors may give them the ability to reduce their
prices for an extended period of time if they so choose. Our business and results of operations may be
materially adversely impacted if we are not able to effectively compete.
We may be unable to stabilize or grow our revenues and cash flows despite the initiatives
we have implemented.
We must produce adequate revenues and cash flows that, when combined with cash on hand and
funds available under our revolving credit facility and other financings, will be sufficient to service our
debt, fund our capital expenditures, pay our taxes, fund our pension and other employee benefit
21
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES