Fitch Ratings announced today that it has revised its outlook for Frontier Communications from "Stable" to "Negative."
Fitch bases its revision on lowered expectations for revenue growth over the next two to three years. Also, the business and data services revenues took a modest hit in 2012, which goes against the upward trend in those areas for local exchange carriers. Business and data have been able to make up for the voice revenue losses. In addition, reforms to intercarrier compensation have lowered revenues.
Fitch does not expect great improvement in Frontier's debt leverage: 3.2x by the end of 2013, and 3.1x by the end of 2014.
On the positive side, churn has come down for residential customers, and revenues for those customers has risen. But that's set against a constant rate of decline from competition, and from the move away from wireline to wireless.
Fitch would downgrade Frontier's rating from its present "BB+" if, by the end of 2013, the company's net leverage rose to 3.3x or more, "and/or if the company does not succeed in generating positive revenue growth in business and data services."
The article Fitch Downgrades Outlook for Frontier Communications originally appeared on Fool.com.Fool contributor Dan Radovsky owns shares of Frontier Communications and Frontier Communications. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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