Frontier’s McBride: We need to drive growth in our business segment

Frontier says that by reorganizing its company structure with a group focused on business services, it can grab market share back from the ever-growing presence of cable.

Perley McBride, CFO of Frontier, told investors during the UBS 44th Annual Global Media and Communications Conference that by segmenting its commercial and consumer operations, it can enhance how it sells and deals with business customers.

“Commercial has been very stable and we believe it should be growing,” McBride said. “So much of our company was focused on consumer and commercial was steady state business and we segmented the business because the products are different, the customers are different, and how you service and sell to them is different.”

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McBride added that it's transforming the commercial segment “from traditional order takers into understanding customer needs and producing great solutions for them.”

Following a challenging integration process of its recent Verizon asset purchase, Frontier realigned sales, marketing and commercial product management under a single leader. Each of these groups report directly Dan McCarthy, CEO of Frontier.

Getting to this point was anything but easy. In developing this new company structure, the telco announced that it is going to lay off 1,000 employees.

Enhancing business penetration

Frontier’s timing to enhance its business segment comes at a key time for the company as it looks to improve revenue trends.

During the third quarter, the service provider reported business services were $1.04 billion, down $2 million year-over-year. At the same time, Frontier is facing greater competition from cable competitors like Charter and Comcast that are enhancing their business capabilities.

Charter, through its acquisition of Time Warner Cable and Bright House Communications, surpassed Verizon as the third largest Ethernet provider, according to Vertical Systems Group’s Mid-Year 2016 U.S. Carrier Ethernet Leaderboard.

McBride acknowledged that while cable competition is an issue, there are plenty of opportunities to increase its presence in markets where it has low penetration. The service provider hired a number of new business sales reps to focus on selling services in the California, Texas and Florida (CTF) regions it entered via its acquisition of the Verizon properties earlier this year.

“It is a very competitive market today on the commercial side,” McBride said. “We have very low penetration so we still believe it’s a big opportunity for us if done right.”

McBride added that “there’s a lot of consolidation in the industry, but I don’t think that makes it tougher for us to compete and it’s all on us to perform.”

Wireless backhaul stability

One part of the commercial business where Frontier is seeing continual headwinds is in wireless backhaul. This is due to the service provider’s wireless customers transitioning off of legacy T-1 and DS-3 TDM circuits to fiber-based Ethernet.

While wireless backhaul revenues have continued to decline, it only represents 3% of Frontier’s revenues. The service provider has not made any immediate plans to grow this segment.

“We made a conscious decision to not grow wireless backhaul as part of our strategy,” McBride said. “For it to grow we’d be changing our capital investment strategy to grow this piece of the business and we have not done that yet.”