It just keeps getting worse for Frontier Communications (NYSE:FTR).
After two years straight of pain the stock is close to making new 52-week lows. Much of this is performance related and due to the fact that customers continue to flee the company quarter-after-quarter. Now, customers in West Virginia could see service delays and other problems.
Union workers in West Virginia and Virginia have gone on strike as of midnight ET. This is another blow to Frontier Communications. While it is not uncommon for telecom workers who are unionized to strike for better contract agreements, this is the latest blow to an already fragile company.
The Communications Workers of America says 1,400 workers are involved in the action after 10 months of negotiations failed to bear fruit.
Job cuts have gone too far, the union says — “we know it and Frontier’s customers know it.” The CWA says informal complaints with the West Virginia Public Service Commission have increased 69% over the past three years.
The contract was set to expire last Aug. 5; it was extended until Nov. 4 and then extended again until March 3rd 2018. This strike follows poor performance in the company’s operations.
Frontier reported revenue of $2.21 billion and saw an operating loss of $1.75 billion. Revenues were down quarter-over-quarter once again. Revenue is also 8.3% lower than last year’s thanks to the loss of customers which we will discuss in a moment. This is simply worrisome.
The results were however slightly better than our projections for $2.20 billion. We were overly bearish, but not by much. The company surpassed our estimates by $10 million. This was a positive result, but let us investigate the customer loss issue.
Customer turnover has been the death of the company. On this front, there has been some slight reason to be positive. Customer churn slowed in the quarter to 1.98%, and improved from 2.08% last quarter. This also is down from the 2.28% before that. This was better than our projections for 2.0%. However, that still means customers are leaving. Let us look deeper into where the losses are stemming from.
At the end of the quarter, Frontier had 4,397,000 residential customers, down from 4,486,000 residential customers in Q2 and down from 4,585,000 at the end of Q1. Coming into the year, there were 4,891,000 residential customers. This is sad. Continued declines are a fundamental weakness in this name. You simply cannot invest in a name like this when such losses are happening.
The company has played with pricing to try and offset these losses. Total residential revenue was $1.09 billion for Q4 2017, compared to $1.10 billion last quarter. The average monthly residential revenue per customer has fallen too in many quarters, however this was one positive piece of news. Average monthly revenue per residential customer rose from $80.91 last quarter to $81.61. While the increase is welcomed, keep in mind that this is still down from the mid $80s almost a year ago.
The business client side of the company continues to suffer as well. At the end of the quarter, Frontier lost another net 10,000 customers. It is now down to just 453,000 business-based customers. This is down from 463,000 business-based customers to start the quarter. The company entered the year at 502,000 business customers.
We believed that business customer loss would decline, but we were wrong in this regard as the churn rate expanded. With this loss of customers, business revenues were down once again. This is another negative trend that should be a flag to you. Total revenue from business-based customers was $941 million in Q4 2017, vs. $ 958 million last quarter. Average monthly revenue per business customers also continued to fall.
This cannot continue, and the latest strike could jeopardize an already fragile relationship with customers.
Broadband used to be a source of strength for Frontier, but the pain continues here. The company buries these results in tables now, rather than discussing them outright. After the Verizon deal the company gained many broadband customers vs. last year. However, for now the fifth time since we have been covering the name, the company lost broadband subscribers. At the end of the quarter, the company had 3,938,000 broadband customers. This is a decline of another 62,000 subscribers from the 4,000,000 at the start of the quarter. This was also down from 4,271,000 broadband customers to start the year. This is just another reason to avoid the name.
Bottom line? Customer loss is crippling the company and it has weighed on sales with no signs of slowing down. The customer losses are across the board, in all segments.