Frontier Communications' Bottom Line Hammered

Frontier Communications Corporation reported on Monday that its first-quarter profits were less than half of the same number a year ago. Frontier's bottom line is being hammered by one-time costs of expansion and shrinking residential customer numbers. While this might seem like dark news for Frontier Communications, the company actually out performed many analysts' estimates.

Frontier Communications, as its name might seem to imply, is a business built on making high speed internet available in geographical locations that are not yet accessible to other Internet Service Providers. Their availability comes with a tradeoff. However, Frontiers speeds rate is much slower than industry leaders like Verizon FiOS or RoadRunner by Time Warner. As the major players extend their reach, slowly but surely, Frontier's market is dwindling. Frontier is also put in the unique situation of needing to expand their coverage in order to survive, so the company is reaching into regions that are increasingly more remote, and that is expensive work. The cost of delivering reliable internet service to the ends of the earth is quite high, and Frontier survives because in those regions, it is the only viable options, but the frontier is shrinking.

As of March 31, the company had just over 3 million residential customers and 302,100 business customers, both figures down from last year's 3.34 million and 333,396 respectively. The average monthly residential revenue per customer fell also from $57.56 a year ago to $57.06. For the full year of 2012, the company expects to continue capital expenditures and free cash flow excluding integration expense and integration capital expenditures. Frontier shares are currently trading at $4.05, up $0.16 or 4.11 percent.