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Frontier Sheds 10,300 Video Subs in Q1

On the heels of its acquisition of Verizon’s wireline operations in California, Texas and Florida on April 1, Frontier Communications said it lost 10,300 video subs (including a reduction of 6,700 satellite video subs through its bundling deal with Dish Network), but added 24,600 net broadband customers in the first quarter of 2016.

As of March 31, Frontier had 2.48 million broadband subs, and 543,400 video subs. The Verizon deal adds about 3.3 million voice subs, 2.1 million broadband connections and 1.2 million Fios video customers.

Frontier’s cutover that started April 1 “was the largest and most complex flash cut that has ever been executed in our industry and I'm proud to say that it has been very successful," Frontier president and CEO Daniel McCarthy said on Tuesday’s earnings call.

He acknowledged that there were bumps during the cutover, but said they were limited to less than 1% of the company’s overall base in any given point in time.

McCarthy said Frontier expects Q2 to be affected by the ongoing integration, with customer metrics in the period “most likely be negative, as we begin to build our marketing campaigns over the coming weeks.”

Frontier, which recently introduced a new brand, “Vantage,” that will be used across its video, broadband and IP voice services, is also pushing ahead with a plan to  launch IP-based, 4K-capable video service to more than 40 markets, representing about 3 million homes, over the next three to four years.

“We can service slightly over 30% of our 14.5 million household footprint with video today, and we anticipate that will grow to well in excess of half over the coming year,” McCarthy said.

McCarthy also weighed in on the FCC’s vote to remake the rules governing the business broadband market that could potentially extend regulated rates to cable operators that provide special access service.

“We think that the Ethernet marketplace is very competitive today,” he said. “I think the reality is that the FCC will find many of the markets very competitive, that it won't have much of an impact at all. I think it's pretty premature at this point to predict what any final decision will look like, because they are really in a fact-finding mode.”

Frontier had about 284,000 business customers at the end of Q1.

On the financial front, Frontier posted Q1 revenue of $1.35 billion, down 4% year-over-year,  and a net loss of $186 million, or 16 cents per share, widened from a net loss of $103 million, or 9 cents per share.

For the full year of 2016, including the impact of the Verizon deal, Frontier's expects adjusted free cash flow in the range of $800 million to $925 million, and capital expenditures for Frontier's combined operations is in the range of $1,250 million to $1,400 million.