Frontier ‘goodwill’ evaporates
Company pinning hopes on software upgrades to cut costs
Frontier Communications took a $517 million loss on its Connecticut operations in 2017, representing a quarter of its overall corporate loss, largely the result of a write-down in “goodwill” that assigns value to assets for accounting purposes — with Frontier taking its Connecticut goodwill down to zero.
Frontier has its corporate headquarters in Norwalk and runs its Connecticut operations from a New Haven base that represents the historic Southern New England Telephone operations it acquired from AT&T in October 2014. The company provides service throughout most of the state. Competitors include Altice USA, Stamford-based Charter Communications and Comcast.
In an annual filing with the state, Frontier reported a net loss for 2017 that was quadruple the year before, as revenue fell by $56 million or 6 percent to $846 million. The company’s Connecticut loss would have been far greater but for the offsetting impact of a $277 million income tax benefit.
Frontier attributed its $463 million write-down in goodwill to lower valuations in the overall telecommunications industry; ongoing operating losses; declines in the price of its stock, which dropped 86 percent last year; and a revaluation in deferred tax liabilities as a result of 2017 federal tax reform.
In addition to its evaporated goodwill in Connecticut, Frontier reported network expenses increased in 2017 by more than $88 million, or 38 percent. A Frontier spokeswoman did not respond immediately Monday to a Hearst Connecticut Media query why expenses spiked last year, though Frontier dealt with extreme weather nationwide.
Speaking in mid-May at a JPMorgan Chase investment conference, Frontier CEO Dan McCarthy provided details on Frontier’s ongoing work to implement a pair of new software suites he says will allow Frontier to manage services far more cost effectively than in the past. He said the upgrade should be completed by the end of this month.
“It creates a platform that captures case interactions on every possible thing that a customer does with us, and then feeds it into artificial intelligence and in some cases robotics,” McCarthy said. “If a customer, for instance, were to call in and they had a trouble ticket, we’ll use the system to identify what they’ve had happen to them as a customer; and then run proactively tests on their circuit identifying what the issues are.
“As it senses it, it will do it automatically and solve the customer’s issue before they even have to talk to someone,” McCarthy said. “For me, one of the easiest places to see costs fall away is from (our) thirdparty call center vendors. They’re good partners, but at some point I’d like to have more and more of my calls in-house — and the way to do that in the most cost-effective way with the biggest impact to (earnings) is to actually prevent a call from ever making it to them.”