New Street Research - Frontier Communications Corporation Class B (FTRCQ) FYBR Quick Hit: Fiber multiples are alive and well (in the private market)

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New Street Research

Jonathan Chaplin

EUR 8533.00 For Business Accounts Only

FYBR Quick Hit: Fiber multiples are alive and well (in the private market)

SHEN announced that they are acquiring Horizon telecom, a commercial fiber provider for $385MM in cash and stock. There is no mention of debt in the press release, and so we assume the EV is $385MM (or $369MM net of tax benefits). Horizon reported $19MM in EBITDA in 2022, and the companies claim $10MM in annual synergies within 18 months. This puts the multiple at close to 20x before synergies and a robust 13x after synergies.

25/10/2023 1 EN

Underlying

Frontier Communications Corporation Class B

Frontier Communications is a holding company. Through its subsidiaries, the company is a provider of communications services. The company conducts business with both consumer and commercial customers. For consumer customers, the company provides broadband, video, voice and other services and products. The company delivers these services over a combination of fiber and copper-based networks. The company's commercial customers consist of: small, medium and larger enterprise customers, whereby the company provides services including broadband service, Ethernet service, circuit-based services, SD-WAN, and managed Wi-Fi; and wholesale customers, which buy both voice and data services to supplement their own network infrastructure.

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US35906A3068 Pink OTC Markets United States

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Analysts

Jonathan Chaplin

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New Street Research

FYBR Quick Hit: ABS debt priced

Frontier announced pricing for its latest ABS debt this afternoon, raising $750MM. The offering consists of $530MM Class A-2 notes at 6.2%, $73MM Class B notes at 7.0%, and $147MM Class C notes at 11.2%. The average cost of debt is 7.4%, which is in-line with our expectation, and ~140bps lower than their last ABS debt issuance. These new tranches of debt have an anticipated repayment period of 7 years (vs. 5 years on the last issuance).

June 6, 2024 June 6, 2024 1 EN

New Street Research

FYBR: Cash flow in steady state

Frontier management has set targets for EBITDA of $4BN and operating FCF of $3BN on a footprint with 10MM fiber locations, in steady state. We built a simple model to vet this outcome. Our model arrives at slightly lower EBITDA and UFCF; however, modest cost cuts get us to the target, and cost cuts are likely. In addition to vetting steady-state targets, the model illuminates how value is created in the fiber business. We built it so that you can easily change assumptions and see the impact on value

EUR 8533.00

March 15, 2024 March 15, 2024 1 EN

New Street Research

ACP Part V: FCC releases survey results

The FCC released a survey that included more than 5,000 ACP households today. The FCC repeated the mistake of prior surveys by asking whether households were new to broadband with ACP as opposed to subscribers that are new to broadband with one of the subsidy programs that followed the pandemic (stimulus checks; EBB; ACP). They also asked the important question, which is “what will you do when ACP ends”. Our quick analysis here focuses mostly on the social costs of ACP going away. We will update our forecast for the impact to the operators in due course.

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Microsoft vs. OpenAI: Implications for investors?

Press reports about ongoing negotiations between Microsoft and OpenAI have intensified in recent weeks. How much does that matter for investors in Microsoft? In this note, we lay out our understanding of the current agreement, outline what is publicly reported about ongoing negotiations, and we provide our perspective on the situation.

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Blair Levin

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SATS, Carr, and the Art of the No Deal…Yet

SATS just filed a new 8-K saying it will make the interest payments on Monday, avoiding a Chapter 11 filing. Our New Street colleagues have published a note today with their perspective. In this note we describe the filing and its implications.

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Supreme Court Upholds USF Framework but Reform Still Ahead

Today, the Supreme Court issued its opinion in the case challenging the legality of Universal Service Fund (USF) framework. As we had predicted, the Court upheld the current framework. In this note we analyze the implications of the decision for the USF reform efforts ahead in the Congress and FCC.

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FYBR Quick Hit: Fiber multiples are alive and well (in the private market)

FYBR Quick Hit: ABS debt priced

FYBR: Cash flow in steady state

ACP Part V: FCC releases survey results

Microsoft vs. OpenAI: Implications for investors?

SATS, Carr, and the Art of the No Deal…Yet

Supreme Court Upholds USF Framework but Reform Still Ahead

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