Frontier and Windstream bankruptcies could be coming in the “not-too-distant” future, said MoffettNathanson financial analysts in a research note today.
“The market anticipates that both these companies will go bankrupt in the not-too-distant future, judging by their sagging bond prices and nosebleed credit default swap prices,” said the researchers.
Frontier and Windstream Bankruptcies?
The revelation came in the midst of a research note focused primarily on CenturyLink – a company that has some similarities with Windstream and Frontier but which, according to the researchers, has better prospects as a result of its recent acquisition of Level 3. The researchers see Frontier’s situation as the most serious of the three.
They note that Windstream’s sale-leaseback of its network with Uniti (originally known as Communications Sales & Leasing) has made the company more of a competitive local exchange carrier, rather than a traditional telco — and it is the traditional telco market that the researchers see as being under threat.
Frontier’s issue, according to the researchers, is that in the residential and small to medium business market, it is competing using mostly obsolete copper assets against technologically superior cable HFC and wireless. And CenturyLink faces the same issue in those markets, although that company is not so reliant on those markets.
In the residential and SMB market, however, “the competitive endgame is preordained,” the analysts wrote. “The telcos are destined to lose this one.”
Because Frontier and Windstream are not the primary focus of today’s research note, the analysts, unfortunately, did not explore what steps, if any, Frontier or Windstream might take to improve their prospects. The analysts’ argument seems particularly downbeat, considering that Frontier has been more vocal about upgrading its copper assets than some other carriers have been. And where telcos have upgraded to fiber-to-the-home, other Moffett Nathanson analysts have argued that it is the telcos’ cable competitors that are threatened.
Would it help Frontier to move to a sale-leaseback approach that the analysts see helping Windstream?
Has the financial market factored in the impact of ongoing advances aimed at boosting the speeds that copper can support, such as Gfast and others?
The answers to questions such as these will become increasingly important as the financial market apparently will continue to question the long-term viability of companies such as Frontier and Windstream.
Image courtesy of flickr user new3dom3000.
3 thoughts on “Analysts: Telcos Destined to Lose, Frontier and Windstream Bankruptcies May be in Near Future”
maybe if Frontier could resist in buying all of Verizon's discarded junk…
Little late for that Junk Dealer. Anyone that didn't dump that stock after the F13 mess was destined to lose all investments.
Frontier was extremely foolish to think they could be successful after buying the Verizon assets in California, Texas, and Florida. Being somewhat familiar with the Florida situation, Verizon did nothing to improve those assets that it bought from General Telephone some years ago. As a result, Frontier actually bought some of the most outdated, poorly maintained telephone equipment and outside plant that could be found anywhere!
To purchase outdated telco equipment in 3 of the largest states in the United States and then expect to be able to upgrade them to a modern IP Fiber environment is absolutely ludicrous. The Frontier management that provided the guidance for this purchase should be fired immediately.
The Federal Government may have to step in to provide emergency telecommunications in those states once Frontier goes under. Frontier saw this as a deal too good to pass up. Verizon saw it as an opportunity to unload 3 large states worth of outdated obsolete telecom and get nicely paid for it.