Frontier's CEO says company is on the rebound thanks to its fiber assets, better customer care

While admitting his company took a few hits on its reputation for its integration efforts after deals with Verizon and AT&T, Frontier Communications CEO and President Dan McCarthy said his company is bouncing back.

Speaking at an investor conference Tuesday morning, McCarthy said Frontier's fiber assets, improved field operations and customer care were key points in the company's turnaround efforts.

Frontier is looking to reduce its debt and customer churn. At the start of the year, Frontier sold off nearly 100 wireless towers in Connecticut, New York and California to Pittsburgh-based Everest Infrastructure Partners for $80 million.

"You'll see us try and drive free cash flow with more consistency and to a better level," McCarthy said. "We had capex that came into the year, especially around some storms from last year. So this year, I think you'll see us really focus on being more consistent and driving free cash flow in a little bit different way. That required us to rethink different business processes, how we allocate capital and how we manage some strategic partnerships.

"And finally we're really focused over a longer period of time, obviously, on debt reduction, and improving leverage. That could take the form of using free cash flow or looking for (selling) other assets like we did last year with the tower sale, and looking for more real estate and different assets that we can monetize."

In its first quarter earnings last month, Frontier lost 38,000 broadband subscribers, fewer than the 43,000 it lost in the year-earlier period and the 45,000 that Wall Street was expecting.

In regards to reducing churn, it has been a long haul for Frontier, but McCarthy said revamping field operations, customer care and tech support is leading to reduced churn.

"Those are areas where we've seen some really good progress, and depending upon some of the initiatives that are currently in testing, we will be elevating those into production in the summer, and potentially getting benefits quicker than even we had originally thought," McCarthy said.

Frontier redesigned its entire field operations ecosystem, which has led to significant improvements in productivity, efficiency, and Frontier's ability to hit its service appointments. Frontier also lowered its use of contractors and shortened the time between its service intervals.

"We set about to really redesign and analyze where our opportunities were in field operations," McCarthy said. "When I talk about field operations, it's the entire ecosystem that touches a customer, whether it's a trouble ticket, service orders, or even just dealing with repairs that might come in online or through a channel. We took apart the entire ecosystem, and then put it back together again."

McCarthy said it took four to five months to redesign field operations in order to reduce friction points with customers that lead to customer churn.

"We're just in the beginning of it, but we've seen some very strong results from that already," McCarthy said.

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Improving the customer experience was also high on Frontier's to-do list. After acquiring its California, Texas and Florida (CTF) landline assets for $10.5 billion from Verizon three years ago, McCarthy said a high percentage of Frontier's tech support was done through third parties and partnerships, which led to a variable cost structure.

Starting in Connecticut, Frontier built an ecosystem that included real time tools for troubleshooting, provisioning and service changes. Frontier is also using artificial intelligence to look at what's going on in the network and proactively test for issues.

"If a customer is having an issue, we can resolve the issue automatically through our products, and then deflect the call so it never winds up into the (service) queue," McCarthy said. "If you can eliminate the call, it flows right to the bottom line."

In addition to reducing costs, the improved customer experience of fixing a service right away leads to a better net promoter score, according to McCarthy.  Frontier also implemented a PEGA platform to automate functions such customer field services, sales automation and customer service.

"We're actually having amazing results with that," McCarthy said. "It's proved to be one of the biggest benefits right out of the gate with our transformation process.

"It was kind of a home run. When we look at the transformation, we're looking at singles, doubles, and never really swinging for the fences on anything. This is proved to be one where we can integrate process improvement, take platforms that we've developed for the integration of the different properties married up with some of the state of the art PEGA capabilities and move it into the ecosystem. It really is kind of a game changer."

On the fiber front, McCarthy said that Frontier will be upgrading its network throughout the course of this year.

"If you look at the fiber ecosystem, it was, in our opinion, much more cost effective to go through the exercise of upgrading to 10 gigabit for the entire ecosystem," McCarthy said. "So that's changing out different routers and changing out LTE shells and different distribution points in the network. We already had a very robust transport system."

The 10G upgrade, which will be largely completed by year's end, also sets up Frontier's small to medium sized business customers with variable speed options. McCarthy said that Verizon and AT&T kept most of the large enterprise customers in their deals with Frontier.

"It's (10G) a much more cost effective scenario," McCarthy said. "When you combine that with next generation, passive optical network technology that we've deployed, you see a much lower cost platform to go after those opportunities. Having a dense fiber network and having a low cost transport with high bandwidth, I think will be a key differentiator for us."