Frontier Communications(US:FYBR)2025-10-28 20:28Financial Performance - Frontier Communications reported operating income of $117 million for Q3 2025, an increase of 36% compared to $86 million in Q3 2024[193]. - Total revenue for Q3 2025 was $1.55 billion, a 4% increase from $1.49 billion in Q3 2024[213]. - Revenue from data and internet services increased by 12% to $1.12 billion for Q3 2025, compared to $1.00 billion in Q3 2024[213]. - Fiber revenue increased by $89 million (10%) to $956 million for Q3 2025, while copper revenue decreased by $27 million (4%) to $577 million[216]. - Consumer fiber broadband revenues surged by 26% for both the three and nine months ended September 30, 2025, compared to the prior year periods[222]. - Business and wholesale revenues rose by 4% and 3% for the three and nine months ended September 30, 2025, respectively, driven by increases in data and internet services[224]. - Data and Internet services revenue increased by $116 million (12%) to $1,120 million for Q3 2025, and by $320 million (11%) to $3,254 million for the nine months ended September 30, 2025[229]. - Total revenue for the three months ended September 30, 2025, was $1,550 million, a $61 million (4%) increase from $1,489 million in Q3 2024[216]. Customer Metrics - Fiber broadband customer net additions were 133,000 for Q3 2025, compared to 104,000 in Q3 2024, reflecting a growth of 28%[200]. - The company added approximately 326,000 fiber passings, bringing the total to approximately 8.8 million locations passed with fiber as of September 30, 2025[190]. - Consumer customer churn for fiber broadband improved to 1.41% in Q3 2025, down from 1.49% in Q3 2024[206]. - For the three months ended September 30, 2025, the company gained approximately 80,000 consumer broadband customers, up from a net gain of 49,000 in the same period of 2024, representing a 63% increase[214]. Operating Expenses - Operating expenses increased by 2% to $1.43 billion for Q3 2025, primarily due to higher depreciation expenses[213]. - Operating expenses for the three months ended September 30, 2025, totaled $1,433 million, a $30 million (2%) increase from $1,403 million in Q3 2024[239]. - Depreciation and amortization expenses increased by $60 million (15%) to $470 million for Q3 2025[239]. - SG&A expenses decreased by $32 million for the three months ended September 30, 2025, primarily due to reductions in professional services, marketing, and compensation[244]. - Restructuring costs and other charges decreased by $7 million and $15 million for the three and nine months ended September 30, 2025, respectively, primarily due to lower severance and employee costs[248]. Capital Expenditures and Investments - Cash flows used by investing activities were $2,415 million for the nine months ended September 30, 2025, compared to $898 million for the prior year period, driven by higher capital expenditures[267]. - Capital expenditures increased to $2,421 million for the nine months ended September 30, 2025, compared to $1,991 million for the same period in 2024[268]. Debt and Liquidity - As of September 30, 2025, the company had liquidity of approximately $1,871 million, comprised of $336 million in cash and cash equivalents and available capacity on credit facilities[258]. - The company recorded an income tax benefit of $14 million and $41 million for the three and nine months ended September 30, 2025, on pre-tax losses of $90 million and $304 million, respectively[255]. - Interest expense increased by $5 million and $6 million for the three and nine months ended September 30, 2025, respectively, primarily due to a higher debt balance[254]. - As of September 30, 2025, 88% of the company's total debt had fixed interest rates, with a fair value of approximately $12.3 billion[314][316]. - The company has a floating rate exposure of $1.0 billion from a term loan facility and $480 million drawn on a $1.5 billion DDTL facility, with a potential additional interest expense of $15 million from a 100 basis points increase in SOFR[315]. Mergers and Acquisitions - The company expects to close its merger with Verizon by Q1 2026, with Verizon acquiring Frontier for $38.50 per share, a 43.7% premium[187]. Regulatory and Funding - Frontier was awarded approximately $371 million over ten years from the RDOF to build gigabit-capable broadband to about 127,000 locations in eight states[299]. - The company accepted $313 million in annual support from the FCC's CAF Phase II program, with a requirement to complete deployment by December 31, 2021[298]. - The NTIA allocated approximately $25.5 billion to states in Frontier's footprint for broadband infrastructure under the IIJA, with ongoing efforts to secure funding[300]. Pension and Interest Rate Exposure - The discount rate for the pension benefit obligation was 5.60% as of December 31, 2024, and 5.50% as of March 31, 2025[317]. - The value of the company's pension plan assets increased by $188 million from $2,328 million at December 31, 2024, to $2,516 million at September 30, 2025[320]. - The company's overall weighted average borrowing rate was 6.774% with a weighted average maturity of approximately 4 years as of September 30, 2025[316]. - The company believes that its exposure to interest rate changes is minimal and that near-term changes would not materially affect its consolidated financial position[315].