REGIONAL- Frontier Communications filed for Chapter 11 bankruptcy protection this past week as it struggles to restructure a massive debt load while maintaining uninterrupted services to consumers. …
REGIONAL- Frontier Communications filed for Chapter 11 bankruptcy protection this past week as it struggles to restructure a massive debt load while maintaining uninterrupted services to consumers.
However, the move won’t halt an ongoing investigation by Minnesota Attorney General Keith Ellison into the company’s business practices.
Frontier provides phone and internet service to a large portion of the Timberjay coverage area, including Ely, Tower, Crane Lake, and surrounding areas.
“We are undertaking a proactive and strategic process with the support of our bondholders to reduce our debt by over $10 billion on an expedited basis,” said Robert Schriesheim, chair of the finance committee for the Frontier board of directors. “We do not expect to experience any interruption in providing services to our customers.”
Between 2020 and 2025 the company has about $11.8 billion in debt obligations coming due, the majority of it unsecured, according to company reports. As of Dec. 31, 2019, the company’s total indebtedness was $17.5 billion.
By filing for Chapter 11 protection the company was able to obtain commitments for $460 million in new financing that will provide necessary flexibility to keep services afloat. Frontier also will continue with a sale of its operations and assets in Oregon, Washington, Idaho, and Montana to Northwest Fiber for $1.352 billion.
As a result of the filing, Frontier’s common stock is being dropped from the NASDAQ stock exchange effective on April 24. On April 17, 2019, Frontier stock on NASDAQ was trading at $2.59 a share; exactly one year later, the price per share had dropped to just 22 cents. Five years ago this month, Frontier stock was trading for just over $105 per share.
Questions about Frontier’s poor service quality and business practices were first highlighted in an investigative report in the Timberjay in late 2017. That report prompted the Minnesota Public Utilities Commission to order an investigation by the state’s Department of Commerce, an investigation that revealed widespread problems in Frontier service territory across the state. Last August, state regulators and Frontier reached agreement on a settlement that offered customers some financial relief for past service lapses. The company is also now required to regularly report on its handling of complaints.
Meanwhile, before the Department of Commerce investigation was complete, Attorney General Ellison initiated his own investigation of Frontier’s promotions, advertising, sales, billing, and provision of internet and telephone services, pursuant to Minnesota’s consumer protection laws.
In an April 16 press release reaffirming his ongoing investigation, Ellison noted that about 90,000 Minnesota households and businesses get telephone service through Frontier, and many more get internet through the company, particularly in rural areas.
“Part of being able to afford your life means knowing the full cost of what you’re getting, getting what you were promised, not being overcharged for things you didn’t ask for, and not being unfairly charged to get rid of things you didn’t ask for,” Ellison said. “But when people signed up for telephone or internet service with Frontier, that’s what happened to them. That’s why regardless of Frontier’s bankruptcy filing, my office is going to keep investigating Frontier, advocate for changes to their business practices, and protect Frontier’s customers in Minnesota.”
New York, Ohio, and West Virginia have instigated similar investigations against Frontier.
While internal Frontier documents frequently use the term “legacy products” to describe services like voice landlines and DSL internet service, in laymen’s terms those would be described as “out of date” or “behind the times.”
Frontier covers 79 percent of its service area with an aging copper-wire-based DSL network, a far slower and less reliable system than the fiber-optics systems used by its competitors, according to a company presentation made just three weeks ago. Frontier has steadily lost customers who have abandoned their land lines for cell phones and voice-over-IP phone service, as well as faster internet. With half of the company’s revenue coming from its residential customers, revenues have also taken a nose dive.
A look at available Frontier residential plans in Tower, Ely, and Crane Lake reveals significant network disparities. Tower internet service plans top out at just 12 Mbps, while Ely subscribers can access a 25 Mbps plan. Conversely, the company advertises a much faster 90 Mbps plan for Crane Lake.
While the plan to reorganize its debt under Chapter 11 court protection gives Frontier the ability to continue services uninterrupted for now, the action has the potential to make it harder to obtain additional long-term capital commitments to overhaul its increasingly obsolete network. According to an article in Forbes, only about 25 percent of companies that file for Chapter 11 bankruptcy ultimately survive.
Additional information for customers, vendors, investors, and company retirees is available online at www.frontierrestructuring.com.
Individuals and businesses that have experienced or continue to experience issues with Frontier are encouraged to report complaints to the Attorney General’s office by calling 800-657-3787, by filing a complaint online at ag.state.mn.us/office/complaint.asp, or by writing the office at 445 Minnesota St., Suite 1400, Saint Paul, MN 55101.