EX-99.1 2 dex991.htm PRESENTATION TO INVESTORS. Presentation to Investors.
Frontier Communications
Donald
R.
Shassian
–
EVP
&
Chief
Financial
Officer
January 2009
Exhibit 99.1

2
Safe Harbor Statement
This presentation contains forward-looking statements that are made pursuant to the safe harbor provisions of The Private Securities
Litigation Reform Act of 1995.  These statements are made on the basis of management's views and assumptions regarding future events
and business performance. Words such as “believe,” “anticipate,” “expect” and similar expressions are intended to identify forward-looking
statements.  Forward-looking statements (including oral representations) involve risks and uncertainties that may cause actual results to
differ materially from any future results, performance or achievements expressed or implied by such statements.  These risks and
uncertainties are based on a number of factors, including but not limited to: reductions in the number of our access lines and high-speed
internet subscribers; the effects of competition from cable, wireless and other wireline carriers (through voice over internet protocol (VOIP)
or otherwise); the effects of greater than anticipated competition requiring new pricing, marketing strategies or new product offerings and
the risk that we will not respond on a timely or profitable basis; the effects of changes in both general and local economic conditions on the
markets we serve, which can impact demand for our products and services, customer purchasing decisions, collectibility of revenue and
required levels of capital expenditures related to new construction of residences and businesses; our ability to effectively manage service
quality; our ability to successfully introduce new product offerings, including our ability to offer bundled service packages on terms that are
both profitable to us and attractive to our customers; our ability to sell enhanced and data services in order to offset ongoing declines in
revenue from local services, switched access services and subsidies; changes in accounting policies or practices adopted voluntarily or as
required by generally accepted accounting principles or regulators; the effects of ongoing changes in the regulation of the communications
industry as a result of federal and state legislation and regulation, including potential changes in state rate of return limitations on our
earnings, access charges and subsidy payments, and regulatory network upgrade and reliability requirements; our ability to effectively
manage our operations, operating expenses and capital expenditures, to pay dividends and to reduce or refinance our debt; adverse
changes in the credit markets and/or in the ratings given to our debt securities by nationally accredited ratings organizations, which could
limit or restrict the availability and/or increase the cost of financing; the effects of bankruptcies in the telecommunications industry, which
could result in potential bad debts; the effects of technological changes and competition on our capital expenditures and product and service
offerings, including the lack of assurance that our ongoing network improvements will be sufficient to meet or exceed the capabilities and
quality of competing networks; the effects of increased medical, retiree and pension expenses and related funding requirements; changes in
income tax rates, tax laws, regulations or rulings, and/or federal or state tax assessments; further declines in the value of our pension plan
assets, which could require us to make contributions to the pension plan in 2009; the effects of state regulatory cash management policies
on our ability to transfer cash among our subsidiaries and to the parent company; our ability to successfully renegotiate union contracts
expiring in 2009 and thereafter; our ability to pay a $1.00 per common share dividend annually, which may be affected by our cash flow
from operations, amount of capital expenditures, debt service requirements, cash paid for income taxes (which will increase in 2009) and
our liquidity; the effects of significantly increased cash taxes in 2009 and future years; the effects of any unfavorable outcome with respect
to any of our current or future legal, governmental, or regulatory proceedings, audits or disputes; and the possible impact of adverse
changes in political or other external factors over which we have no control, including hurricanes or other severe weather. These and other
uncertainties related to our business are described in greater detail in our filings with the Securities and Exchange Commission, including
our reports on Forms 10-K and 10-Q. We undertake no obligation to publicly update or revise any forward-looking statement or to make any
other forward-looking statements, whether as a result of new information, future events or otherwise unless required to do so by securities
laws

3
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures in evaluating its performance.  These include free cash flow and EBITDA or “operating cash flow”
which we define as operating income plus depreciation and amortization.  A reconciliation of the differences between EBITDA and free cash flow and the
most comparable financial measures calculated and presented in accordance with GAAP is included in the tables that follow.  The non-GAAP financial
measures are by definition not measures of financial performance under generally accepted accounting principles and are not alternatives to operating
income or net income reflected in the statement of operations or to cash flow as reflected in the statement of cash flows and are not necessarily indicative
of cash available to fund all cash flow needs.  The non-GAAP financial measures used by the Company may not be comparable to similarly titled measures of
other companies.  
The Company believes that presentation of non-GAAP financial measures provides useful information to investors regarding the Company’s financial
condition and results of operations because these measures, when used in conjunction with related GAAP financial measures, (i) together provide a more
comprehensive view of the Company’s core operations and ability to generate cash flow, (ii) provide investors with the financial analytical framework upon
which management bases financial, operational, compensation and planning decisions, and (iii) presents measurements that investors and rating agencies
have indicated to management are useful to them in assessing the Company and its results of operations.  Management uses these non-GAAP financial
measures to plan and measure the performance of its core operations, and its divisions measure performance and report to management based upon these
measures.  In addition, the Company believes that free cash flow and EBITDA, as the Company defines them, can assist in comparing performance from
period to period, without taking into account factors affecting cash flow reflected in the statement of cash flows, including changes in working capital and
the timing of purchases and payments. The Company has shown adjustments to its financial presentations to exclude severance and early retirement costs
in 2004, 2005, 2006, 2007 and year to date September 30, 2008, a pension curtailment gain in 2007 and management succession and strategic alternatives
expenses in 2004 because the Company believes that the magnitude of such costs incurred in any one period materially exceeds that which has been
incurred by the Company in any other period during 2004 through 2008.
Management uses these non-GAAP financial measures to (i) assist in analyzing the Company’s underlying financial performance from period to period, (ii)
evaluate the financial performance of its business units, (iii) analyze and evaluate strategic and operational decisions, (iv) establish criteria for
compensation decisions, and (v) assist management in understanding the Company’s ability to generate cash flow and, as a result, to plan for future capital
and operational decisions.  Management uses these non-GAAP financial measures in conjunction with related GAAP financial measures.  The Company
believes that the non-GAAP financial measures are meaningful and useful for the reasons outlined above.     
While the Company utilizes these non-GAAP financial measures in managing and analyzing its business and financial condition and believes they are useful
to management and to investors for the reasons described above, these non-GAAP financial measures have certain shortcomings.  In particular, free cash
flow does not represent the residual cash flow available for discretionary expenditures, since items such as debt repayments and dividends are not deducted
in determining such measure.  EBITDA has similar shortcomings as interest, income taxes, capital expenditures, debt repayments and dividends are not
deducted in determining this measure.  Management compensates for the shortcomings of these measures by utilizing them in conjunction with their
comparable GAAP financial measures.  The information in this presentation should be read in conjunction with the financial statements and footnotes
contained in our documents filed with the U.S. Securities and Exchange Commission.

4
Frontier Communications is ……
Frontier Communications Corporation (NYSE: FTR) is one of the nation's largest rural local
exchange carriers, offering local and long-distance telephone service, Internet access, wireless
Internet access, DISH satellite TV and more…..
$384,118
YTD Free Cash Flow ($ in 000s)
$917,106
YTD EBITDA ($ in 000s)
$1,689,626
YTD Revenue ($ in 000s)
571,946
High Speed Internet Subscribers
2,296,460
Access Lines
24
States
Key
Metrics
1
1. Metrics are year to date as of September 30, 2008
•
Geographic Highlights
•
Rural Footprint (13 Households / Sq Mile)
•
24
States;
285
counties;
70
Local
Market
Clusters
•
Mature
Cable
VOIP
Competition
(65%
of
Our Footprint  )
Geographic Footprint

5
Key Value Drivers
1.
Unique Customer Experience
2.
Robust Local & National Network
3.
Consistent Execution of Operational Goals
4.
Consistent Execution of Financial Goals
5.
Disciplined Growth Strategy

6
Customer
Value Added Services
Full High Speed Installation
Price Protection / Auto Renewal
Web Content and Services
Personalized Portal
Wireless Modems
Peace of Mind Services
Integrated Product Offers
Frontier Connections
Digital Phone, HSI, Video, Wireless Data:
Enhancement Upgrades
Business Offers:
Unlimited Long Distance
Metro Ethernet
Expanded
Distribution
Channels
Alternate Channels
In-Bound Call Centers
Internet Sales
Localized
Offerings
“Aspirational”
Gifts
Localized Messaging
Seasonal Promotions &
Targeted Incentives
Community
Involvement
Local Presence
Events, Organization Membership
Educational Support
One-to-One Marketing
Anniversary Program
Loyalty Program
Retention Plans
Segmentation
Win Back
Customer Service  
24/7 Local Technician Service
Customer Service –
7 days/week
Internet Help Desk –
24/7
2 Hour Appointment Windows
Electronic Bill Payment
Online Information and Ordering
1. Unique Customer Experience
Goals:
Retain Customers
Increase Customer Spending
Acquire New Customers
Win Back Lost Customers
•
Frontier’s Local “Go –
To –
Market”
Strategy

7
1. Unique Customer Experience (continued)
•
Delivering A “Peace of Mind”
Experience
•
Big Company Advantages, Small Company Feel
•
Local Manager Structure
•
Unique Welcome Process
•
Exceptional Service Levels
•
2 Hour Appointment Windows
Secure Customer Index
0%
5%
10%
15%
20%
25%
30%
35%
40%
Q4 '07
Q1 '08
Q2 '08
Q3 '08
Residential
Business

8
1. Unique Customer Experience (continued)
•
Broad Spectrum of             
Products & Services
•
Simple Double Play & Triple
Play Bundles
•
Good, Better, Best Choices
for Voice, Video, Data
•
Peace of Mind Product Suite
•
Directory Advertising
•
Wireless Data

9
1. Unique Customer Experience (continued)
•
Innovative Marketing
Programs
•
Multi-Year Price Protection Plans
•
Loyalty Programs
•
Aspirational Gifts
•
Community Connections
•
Take The Lead Referrals

10
2. Robust Local & National Network
•Robust Local Networks
•
1,007 ILEC Exchanges
•
1,024 Central Offices
•
Migration To VOIP In 5 Major
Markets
•
Fiber To Home In All Greenfield
Builds
•
Approximately 40% Of Frontier
Local Networks Can Provide
20mps
1
Service
5 - 10k ft.
22%
10 - 15k ft.
7%
15 - 18k ft.
14%
+ 18k ft.
18%
<5k ft.
39%
•
Flexible network architecture allows delivery of
advanced services to residential and business customers
Notes
1.
Based on Network Capability View as of 9/30/08
Frontier
Average
Loop
Lengths ¹

11
2. Robust Local & National Network
(continued)
•
Diverse,
High
Capacity
10
Gig
Data
Backbone
1
•
12,060
Route
Miles
/
Avg.
30%
Utilized
1
Notes
1.Assumes the completion of the National Data Backbone upgrade from 2.5 Gig to 10 Gig, which is anticipated to be completed by 03/31/09
•
Quality Enabled Network
That Provides Priority To
Voice And Data
•
Complete Redundancy In
Both Network Equipment
And Routes
•
250 Bilateral Peering
Agreements To Reduce
Cost
•
Deep Packet Inspection
Technology Implemented

12
2. Robust Local & National Network (continued)
•
Extensive HSI
Availability
•
88% Availability
•
Well Positioned to
Support Continued
Growth of High Speed
Subscribers and Non-
Switched Revenue
Notes
1.
Based on Product Availability View as of 9/30/08
464
479
497
524
543
559
572
$53
$61
$61
$66
$63
$66
$67
24.9%
23.9%
22.7%
21.5%
20.2%
19.1%
18.3%
-
100
200
300
400
500
600
700
Q1 '07
Q2 '07
Q3 '07
Q4 '07
Q1 '08
Q2 '08
Q3 '08
$
$20
$40
$60
$80
$100
$120
$140
High Speed Internet Subscribers
Non Switched Revenue
HSI Penetration
86%
88%
62%
64%
39%
39%
10%
11%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1 Mbps
3 Mbps
6 Mbps
20 Mbps
June '08
September '08
1

13
3. Consistent Execution of Operational Goals
•Building a Culture that
Drives Results
•
Hiring and Retaining “Great
Athletes”
•
Ensuring Employees Have the Tools
They Need to Be Successful
•
Innovative Solutions to Increase
Workforce Efficiency
•
Standardized Field Processes
•
Cultivating Strong Relationships
with our Labor Unions and
Regulatory Agencies
Notes
1.
For the three months ended 9/30/08
EBITDA %
1
26.3%
30.5%
30.6%
32.1%
39.6%
42.1%
43.3%
47.5%
48.5%
51.9%
54.1%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
55.0%
60.0%
FRP
ALSK
SURW
Q
CNSL
DECC
EQ
CTL
IWA
WIN
FTR

14
3. Consistent Execution of Operational Goals (continued)
•
Customers Have Demonstrated
a Willingness to Pay for Quality
•
Development and Delivery of
New Products and Services
Provides Diversity for Our
Revenue Stream
$222
$249
$248
$240
$241
$240
$239
1,350
1,400
1,450
1,500
1,550
1,600
1,650
1,700
1,750
Q1 '07
Q2 '07
Q3 '07
Q4 '07
Q1 '08
Q2 '08
Q3 '08
$205
$210
$215
$220
$225
$230
$235
$240
$245
$250
$255
Residential Lines
Residential Revenues
•
Frontier Provides Our Business
Customers Multiple Options for
Their Communications Needs
•
Today’s Business Customers
Continue to Require Greater
Bandwidth For Their Operations
$195
$217
$215
$223
$220
$222
$220
790
800
810
820
830
840
850
860
Q1 '07
Q2 '07
Q3 '07
Q4 '07
Q1 '08
Q2 '08
Q3 '08
$180
$185
$190
$195
$200
$205
$210
$215
$220
$225
$230
Business Lines
Business Revenues

15
3. Consistent Execution of Operational Goals (continued)
36%
35%
33%
29%
34%
33%
33%
35%
25%
26%
28%
29%
6%
6%
7%
7%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Q4 '07
Q1 '08
Q2 '08
Q3 '08
Unbundled
Single Play
Double Play
Triple Play
Customer
Segmentation
•
Providing Our Employees
With The Tools Needed To
Help Our Customers
Understand Our Value
Proposition
•
Delivering Value Added
Products And Services To Our
Customers Enables Us To
Capture Increased Wallet
Share
0.5%
0.7%
0.9%
1.1%
1.3%
1.5%
1.7%
1.9%
Q1 '07
Q2 '07
Q3 '07
Q4 '07
Q1 '08
Q2 '08
Q3 '08
Double
Triple
Churn
Levels
For
Customer
Bundles

16
4. Consistent Execution of Financial Goals (continued)
•
Strong, Stable Free Cash Flow Generation
•
Maintaining Stable Revenues
•
Delivering Quality Products and Services our Customers Want
•
Driving
Customer
Revenues
1
•
Industry Leading EBITDA Margins
$222
$195
$139
$249
$217
$113
$248
$215
$113
$240
$223
$114
$241
$220
$108
$240
$222
$101
$239
$220
$100
-
$100
$200
$300
$400
$500
$600
Q1 '07
Q2 '07
Q3 '07
Q4 '07
Q1 '08
Q2 '08
Q3 '08
Residential Revenues
Business Revenues
Regulatory Revenues
$222
$249
$248
$240
$241
$240
$239
$195
$217
$215
$223
$220
$222
$220
$63.37
$61.53
$62.14
$63.11
$63.88
$65.07
$65.89
$40.00
$45.00
$50.00
$55.00
$60.00
$65.00
$70.00
Q1 '07
Q2 '07
Q3 '07
Q4 '07
Q1 '08
Q2 '08
Q3 '08
$
$100
$200
$300
$400
$500
$600
Residential Revenues
Business Revenues
Avg. Mthly Cust. Rev  / Avg. Access Line
Notes
1.
Customer revenue is defined as total revenue less access services. Access services include switched network access and subsidies.
2.
The reduction in Average monthly Customer Revenue / Average access line between Q1 ’07 and Q2 ’07 was due in part to the acquisition of Commonwealth Telephone
2

17
4. Consistent Execution of Financial Goals (continued)
•
Solid Balance Sheet
•
Investment Grade Debt Covenants
•
No Debt Refinancing Needed Until 2011
•
Effective Q4 2008, Utilizing Residual Free Cash Flow to De-Lever
$0
$200
$400
$600
$800
$1,000
$1,200
2008
2009
2010
2011
2012
2013
2014-19
2020-24
2025-29
2030-34
2035-39
2040+
Senior Notes / Debentures
Industrial Revenue Bonds
Rural Utilities Service Loan Contacts
Subsidiary Senior Notes
CoBank Facility (fully-drawn)
Revolving Credit Facility (availability)

18
5. Disciplined Growth Strategy
•
Well Positioned for
Continued Industry
Consolidation
•
Clearly Established
Acquisition Criteria
•
Proven Integration
Process Provides
Confidence in Achieving
Synergy Targets
~ 6.5x EBITDA
Purchase Price
~ $15MM
Revenue
~ 14,000
Access Lines
~ 7.0x EBITDA
Purchase Price
$45MM or ~ 29% of Cash OPEX
Revised Synergy Estimates
Global Valley Networks
Target
$30MM or ~ 20% of Cash OPEX
Anticipated Synergies at Close
~ 435,000
Access Lines
~ $327MM
Revenue
Commonwealth Telephone
Target
Strategic Accomplishments

19
What You Can Expect From Us
•
Provide a Unique Customer Experience
•
Annual Growth in Customer Revenue
•
New Products and Innovative Marketing
•
Consistently Strong EBITDA Margins
•
Continuous Achievement of Cost Reduction Initiatives
•
Efficient Execution of Our Operating Strategy
•
“Competitively Fit”
–
Lean & Flexible
•
Shareholder Friendly Actions
•
Sustainable Consistent Dividend
•
Smart Utilization of Residual Free Cash Flow
•
Historically
–
Share
Repurchases
•
Effective
Q4
2008
–
Focus
on
De-leveraging

Questions

Appendix

22
Selected Financial Metrics
23.1%
$528
13.8%
$316
54.7%
21.5%
0.9%
2
$1,809
$2,288
2007
22.7%
$384
12.1%
$204
54.3%
24.9%
(0.4%)
3
$1,381
$1,690
YTD-9’08
$2,025
$2,017
$2,022
Revenue
$562
$544
$503
Free Cash Flow
5
$269
$259
$264
CAPEX
$1,597
$1,586
$1,565
Customer
Revenue
1
-
% of Revenue
-
% of Revenue
EBITDA
Margin
%
4
HSI Penetration
-
% Growth
($ in Millions)
27.7%
27.0%
24.9%
13.3%   
12.8%
13.1%
55.7%
55.3%
54.5%
18.5%
14.2%
9.4%
0.7%
1.3%
1.5%
2006
2005
2004
Notes
1. Customer revenue is defined as total revenue less access services. Access services include switched network access and subsidies.
2. % Growth for 2007 excludes $196.4M of revenue from acquisitions in 2007.
3.
%
Growth
for
YTD
Q2
2008
compares
YTD
Q2
2008
results
versus
YTD
Q2
2007
results
ProForma
for
an
additional
2.25
months
of
CTE,
the
acquisition
of
GVN
and
the
sale
of
the
CTE
Equipment
Co.
4. For a detailed definition please refer to page 24.
5. Free cash flow includes ELI for all years prior to its sale in July of 2006.  For a detailed definition of free cash flow, refer to page 24.

23
Reconciliation of Non-GAAP Financial Measures
YTD
($ in 000's)
2004
2005
2006
2007
Q3 2008
EBITDA (Operating Cash Flow)
Operating Income
460,301
$     
588,968
$     
644,490
$     
705,416
$     
490,522
$   
Add back:
    Depreciation and amortization
549,381
       
520,204
       
476,487
       
545,856
       
422,986
     
EBITDA (Operating Cash Flow), as reported
1,009,682
$  
1,109,172
$  
1,120,977
$  
1,251,272
$  
913,508
$   
Add back:
Severance and early retirement costs
1,182
          
6,981
          
7,193
          
13,874
         
3,598
         
Pension Curtailment Gain (Non Cash)
-
              
-
              
-
              
(14,379)
        
-
            
Management succession and strategic alternatives expenses
90,632
         
-
              
-
              
-
              
-
            
EBITDA (Operating Cash Flow), as adjusted
1,101,496
$  
1,116,153
$  
1,128,170
$  
1,250,767
$  
917,106
$   
Revenue
2,022,378
$  
2,017,041
$  
2,025,367
$  
2,288,015
$  
1,689,626
$ 
EBITDA (Operating Cash Flow), as adjusted as % of Revenue
54.5%
55.3%
55.7%
54.7%
54.3%
For the years ended December 31,

24
Reconciliation of Non-GAAP Financial Measures
Notes
1. Includes premium paid on debt repurchase in second quarter.
YTD
($ in 000's)
2004
2005
2006
2007
Q3 2008
Net
Income
Available
to
Common
Shareholders
to
Free
Cash
Flow
Net income available to common shareholders
72,150
$      
202,375
$    
344,555
$    
214,654
$    
148,362
$    
Add back:
Depreciation and amortization
549,381
520,204
476,487
545,856
422,986
Income tax expense
4,247
75,270
136,479
128,014
76,717
Management succession and strategic alternatives expenses
90,632
-
-
-
-
Stock based compensation
10,963
8,427
10,340
9,022
9,211
Subtract:
Cash paid (refunded) for income taxes
(4,901)
4,711
5,365
54,407
70,174
Pension Curtailment Gain (Non-Cash)
-
-
-
14,379
-
Other income (loss), net
(34,242)
(2,843)
60,271
(15,038)
(1)
(1,215)
Capital expenditures
263,949
259,448
268,806
315,793
204,199
Gain on sale of discontinued operations
-
1,167
71,635
-
-
Free cash flow
502,567
$    
543,793
$    
561,784
$    
528,005
$    
384,118
$    
Revenue
2,022,378
$
2,017,041
$
2,025,367
$
2,288,015
$
1,689,626
$ 
Free cash flow as % of Revenue
24.9%
27.0%
27.7%
23.1%
22.7%
For the years ended December 31,

Frontier Communications