Frontier Communications Corp (NASDAQ:FTR) announced they will be buying assets from Verizon. This includes 3.7 million voice connections, 2.2 million broadband and 1.2 million FiOS video links. The company has been making strong gains recently. Net income has grown by over 18% and this kind of deal could be critical in keeping that momentum strong. The company runs a high gross profit margin compared to its peers, keeping the number in the high 40% range.The deal is sending the wireless assets to Frontier and in return will receive $10.54 billion in cash and cell phone towers in the sum of $5 billion to American Tower Corp. Verizon has been working an initiative to reduce debt and raise cash so they can continue with productive investments.
Verizon has been trying to dump non-core assets and this worked to Frontiers advantage. The deal is expected to complete by next year and needs to pass regulatory scrutiny. Frontier Communications Corp (NASDAQ:FTR) in return is getting wireless operations in California, Florida and Texas. Frontier recently completed another deal in 2009 with Verizon for rural landlines. The deal is expected to give solid shareholder value. Frontier is expanding its wirelessreachto almost 10 million more customers. Analysts are reacting to the news also with positive views. The wireless industry is highly competitive and exposure is critical to all company’s in the sector.
Frontier operates in 28 states and offers services in many forums to small and large businesses. Among the companies services and products are broadband, wireless Internet and a large selection of other offerings. Bundled services are a feature of Frontier Communications Corp (NASDAQ:FTR)’s marketing pitch. The company employees over 17k people and is a strong presence in their regions.
The stock just exploded on the news of the assets purchase. Strong volume and price appreciation were the theme of the day as the issues raced to its 52-week high. The stock is getting a little overbought and needs to consolidate. The current price levels should provide at least a temporary resting spot for the shares.
Frontier Communications Corp (NASDAQ:FTR) is a turnaround stock, as evident from the price action of the last few years. The stock had suffered from a sharp decline in 2011-12 but the following years did not turn out to be the same. For the last 2 years, the stock has been rising with the sharpest rally coming in the last 2 weeks. The Rounded Bottom pattern suggests targets of $9 and $10 in the next few weeks. All dips could be bought till $6.50.