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On Jul 4, we maintained our Neutral recommendation on Frontier Communications Corporation (FTR - Analyst Report). The company’s enhanced broadband deployment, new product offerings and business segment restructuring are expected to boost its operational level. Nevertheless, the company faces several headwinds that may impede its long-term results going forward. This rural communication service provider holds a Zacks Rank #3 (Hold).

Why Maintained?

We believe that Frontier Communications is poised to benefit form customer retention measures, market share gains, broadband expansion as well as better sales and marketing initiatives. Further, it targets the restructuring of pricing plans to fuel customer accretion through value-for-money offers. To address the rising demand for customer service in a rapidly growing wireless market, Frontier has also introduced a range of technical support services that work round the clock and throughout the year.

Frontier Communications continues to offer attractive packages of value-added services to its customers. The company has rolled out wholesale carrier Ethernet services in 23 out of the 27 states where it operates. The unique service will increase users’ bandwidth with the aid of software thereby curtailing expenses and improving customer experience.

We remain optimistic on Frontier’s collaborations with other companies such as AT&T Inc. (T - Analyst Report) to offer differentiated products to complement customers’ needs. The company has allied with various SMEs, educational institutions and hospitals to promote its CPE (customer premises equipments) that contribute approximately 9% to its revenues. The company’s latest deal was with a major technology protection company – Asurion. Through this transaction, Frontier Secure extends extensive equipment protection to residential and small business customers.

However, we stay on the sidelines considering the regulatory and competitive pressures along with high expenditures on promotional activities plus access line losses that are expected to strain the company’s performance level.

The second and third quarters of 2013 have the Zacks Consensus Estimate for earnings pegged at 6 cents per share. This reflects year-over-year decline of 30.7% for the next quarter and 16.9% for the third.

Other Stocks    

Companies operating within the telecommunication sector that are worth taking note of include Alaska Communications Systems Group Inc. (ALSK - Snapshot Report) – that holds a Zacks Rank #1 (Strong Buy) and Consolidated Communications Holdings Inc. (CNSL - Snapshot Report) –  that carries a Zacks Rank #2 (Buy).

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