Frontier Communications Explores Potential Sale or Merger, Brings M&A Exec on Board

Frontier Communications Explores Potential Sale or Merger, Brings M&A Exec on Board

The strategic review announcement heightened inquiries about a potential merger or sale of the telecommunications firm.

<byline>By Arcelia Martin<byline>

Frontier Communications, the cable and internet firm that moved its corporate headquarters to Dallas last year, announced Monday that it will undergo a strategic review that could potentially lead to a sale, merger or disposal of assets.

The company disclosed the review as it appointed Woody Young, former chairman of mergers and acquisitions at Perella Weinberg Partners, to its board of directors.

“The board and management team are executing a formal and comprehensive review process of all opportunities to unlock shareholder value, including continued optimization of our operational and financing strategy, strategic partnerships, joint ventures, divestitures, mergers, and business combinations,” Frontier told investors in a statement.

Frontier did not respond to questions from The Dallas Morning News about heightened inquiries of a merger or sale.

The fiber broadband provider has been under pressure since late last year from activist investment firm Jana Partners. It urged Frontier’s board to begin a strategic review, citing lagging shareholder value.

“We believe that a bona fide evaluation of strategic alternatives would lead the board to conclude that a sale transaction offers the best risk-adjusted outcome for shareholders,” Jana Partners managing partners Barry Rosenstein and Scott Ostfeld wrote in a December letter to Frontier’s board.

Frontier executive board chairman John G. Stratton said he welcomes “constructive and helpful input from our shareholders.”

“Since we began this turnaround in 2021, the team has successfully executed our fiber-first strategy,” Stratton said in a statement. “Over the last three years, we have doubled our fiber footprint, rapidly expanded our fiber customer base, achieved year-over-year EBITDA growth in 2023, and completed a landmark fiber securitization transaction.

“As Frontier enters the next phase of its evolution, we believe that there are opportunities to create additional value for our shareholders,” he said.

In November, a Moffet Nathanson research report noted that pressure to sell might be a way to measure the value of the telecommunications company amid Frontier’s volatile stock price.

“There’s some logic to the idea that Frontier might be better off transforming its business under patient private ownership, where enthusiasm for fiber transformation stories remains more robust, rather than being subject to the vagaries of the public markets,” analysts wrote. “But the public markets are far from incapable of financing long-term business models.”

The research firm argued that Frontier seems on the cusp of offering sustained revenue and growth, and selling the company could give an inaccurate read of Frontier’s worth, shortchanging current shareholders.

Analysts at New Street Research wrote that the most likely buyers would be its larger competitors — Dallas-based AT&T, Verizon and T-Mobile.

“Running an auction would be a mistake now,” New Street analysts stated. “But running a strategic review and adding a strong advisor to the board now makes lots of sense.”

The telecommunications company moved its headquarters to Dallas from Norwalk, Conn., in September. Frontier said at the time that it expected to create upwards of 3,000 jobs in Texas over the next decade.

The move was meant to promote Frontier, one of the 10 largest cable and internet providers in the country, as a local and national telecommunications company. The area is already home to industry giant AT&T, and Verizon is working on a major expansion of its regional campus in Irving.

The Dallas City Council designated Frontier’s new headquarters space as an enterprise zone, giving the company a chance to seek rebates on state sales and use taxes after investing $7 million locally.

Frontier has 2.9 million customers in 25 states and revenue of $5.79 billion in 2022 after adding 250,000 new fiber broadband customers during the year. The company is scheduled to report its 2023 results on Feb. 23.