Frontier Communications 2014 Annual Report Download - page 4

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households as of December 31, 2014. Since 2012, Frontier received a total of $72 million from
the first round of the Federal Communications Commission’s (FCC) Connect America Fund
(CAF) Phase I and $61 million related to the second round of CAF Phase I to support
broadband deployment in unserved and underserved high-cost areas. We spent $56 million of
these funds on network expansion in 2014 and $94 million to date, enabling broadband for
164,000 unserved and underserved households.
•Revenue Trajectory and Customer Metrics
Total residential revenue for 2014 increased 3% as compared to 2013. Total residential revenue
for 2014 included $116 million of revenues attributable to the Connecticut Acquisition for the
period from October 24, 2014 through December 31, 2014. Excluding the Connecticut
operations, total residential revenue declined 3% as compared with 2013. Our average monthly
residential revenue per customer during 2014 improved by 3% as compared to the prior year.
Total business revenue for 2014 decreased 1% as compared to 2013. Total business revenue
for 2014 included $90 million of revenues attributable to the Connecticut Acquisition for the
period from October 24, 2014 through December 31, 2014. Excluding the Connecticut
operations, total business revenue declined 5% as compared with 2013. Our average monthly
business revenue per customer during 2014 improved by 1% as compared to the prior year.
Our residential customer losses, excluding the Connecticut operations, improved slightly in
2014. We believe that this improvement in customer retention is principally due to investments in
our network, our local engagement strategy, improved customer service and simplified products
and pricing. In addition to our increase in broadband subscribers, we added approximately
201,300 net video subscribers during 2014, substantially all of which were attributable to the
Connecticut Acquisition. See “Customer Metrics” for additional information.
•Financial Profile
During 2014, we generated total revenue of $4,772 million, including customer revenue of
$4,253 million and regulatory revenue of $520 million, and net cash provided by operating
activities of $1,270 million. We have a well-balanced debt maturity schedule and we had
available liquidity of over $1.4 billion as of December 31, 2014, comprised of cash and available
credit on our $750 million revolving credit facility.
Our operating results, prudent capital investments, and expense management provided a strong
cash flow base and a solid financial platform for investing in our business, servicing our debt and
maintaining our dividend payout in 2014.
•Local Engagement
On September 10, 2014, we, along with our strategic partners DISH Network and CoBank,
launched America’s Best Communities (ABC), a $10 million prize competition to stimulate
growth and revitalization in small cities and towns across our footprint. The ABC contest was
designed to help address the need for growth by identifying and investing in innovative ideas
that small cities and towns can use to build and sustain their local economies. The winning
ideas, which will be announced in 2017, will then be available as a roadmap for growth for all
rural communities across the U.S. In creating this contest, we emphasize our commitment to
supporting sustained economic success in small communities in the United States.
The Verizon Transaction
On February 5, 2015, the Company entered into an agreement with Verizon Communications Inc.
(Verizon) to acquire Verizon’s wireline operations that provide services to residential, commercial and
wholesale customers in California, Florida and Texas for a purchase price of $10.54 billion in cash (the
Verizon Transaction). As of the date of the announcement, these Verizon properties included
3.7 million voice connections, 2.2 million broadband connections, and 1.2 million FiOSvideo
connections. The network being acquired is the product of substantial capital investments made by
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES