Frontier Bankruptcy: Here’s How It Unfolded
Even though it came as no surprise, the Frontier chapter 11 bankruptcy filing disrupted the channel.
After months of speculation, the Frontier Chapter 11 bankruptcy filing last month didn’t come as a huge surprise to most. But it rocked the channel nonetheless.
In some ways, despite the COVID-19 pandemic, many partners are thriving by jumping on the unified communications wave. Meantime, big-name suppliers and distributors are stepping up to help those who are not faring so well.
But it’s some of those same big names which have piled up debt or gotten themselves into other types of dire financial straits, leading them down the road to bankruptcy. The Frontier Chapter 11 bankruptcy filing joins similar moves by Windstream, Sungard Availability Services, Fusion Connect and other big channel players — in just the past year.
It’s probably too early to predict exactly how the filing will impact the company’s channel program. However, Adam Edwards, CEO of master agent Telarus, told us last month he’s confident that Frontier will honor commissions and that “the channel is a priority.”
Frontier formally filed its restructuring plan with the U.S. Bankruptcy Court for the Southern District of New York on Friday, Bloomberg Law reported.
Plagued by more than just financial issues, Frontier might have an uphill battle winning over both business customers and its residential consumers. For instance, the Better Business Bureau gave the company an “F,” citing a one-star average customer rating. And a professor at the University of Wisconsin told The Badger Project that “Frontier’s Wisconsin customers can expect a continuation of poor service, foregone plant maintenance, and lack of planning for future rural broadband expansion.” That was after it filed for bankruptcy protection. Ouch.
In the gallery below, we’ve compiled a timeline of events, beginning last December, which outline how the Frontier Chapter 11 bankruptcy unfolded. Stay tuned to Channel Partners for continuing coverage of the company’s recovery.
New CEO as Debt Question Looms
Frontier CEO Daniel McCarthy stepped down last December, paving the way for a new chief executive. Bernie Han came to the Connecticut-based telco from Dish Network, where he was chief strategy officer. The company praised Han for "turnaround initiatives that increased profitability, enhanced customer experiences and reduced churn rate."
Tackling Frontier's $17.5 billion debt would be Han's first priority.
“Frontier has a strong core business that maintains the trust of millions of customers across the country," Han said on Dec. 4. "And I am honored to take on the role of CEO at a time where we have both challenges to overcome and substantial opportunities ahead,” Han said.
Review Frontier's beginning steps toward Chapter 11.
Frontier CEO Daniel McCarthy stepped down last December, paving the way for a new chief executive. Bernie Han came to the Connecticut-based telco from Dish Network, where he was chief strategy officer. The company praised Han for "turnaround initiatives that increased profitability, enhanced customer experiences and reduced churn rate."
Tackling Frontier's $17.5 billion debt would be Han's first priority.
“Frontier has a strong core business that maintains the trust of millions of customers across the country," Han said on Dec. 4. "And I am honored to take on the role of CEO at a time where we have both challenges to overcome and substantial opportunities ahead,” Han said.
Review Frontier's beginning steps toward Chapter 11.
Bankruptcy Likely 'Only Way Out'
Ovum's (now part of Omdia) Mike Sapien predicted as early as Jan. 23 that bankruptcy was Frontier's "only way out." It was widely speculated that the company's new CEO was meeting with creditors and advisers about a restructuring plan. A payment covering more than $350 million in debt was coming due on March 15.
Nevertheless, Frontier's VP of corporate communications and external affairs told Channel Partners that the company's business and operations were "solid."
“Given [Frontier's] situation, new services and complex business services become almost impossible to support,” Ovum's Sapien told us. “And it seems like in many of their larger markets, they are competing with the cable companies who are doing very well with business services, and also improved their customer service with consumers and business customers.”
Read more from the early days of bankruptcy speculation.
Ovum's (now part of Omdia) Mike Sapien predicted as early as Jan. 23 that bankruptcy was Frontier's "only way out." It was widely speculated that the company's new CEO was meeting with creditors and advisers about a restructuring plan. A payment covering more than $350 million in debt was coming due on March 15.
Nevertheless, Frontier's VP of corporate communications and external affairs told Channel Partners that the company's business and operations were "solid."
“Given [Frontier's] situation, new services and complex business services become almost impossible to support,” Ovum's Sapien told us. “And it seems like in many of their larger markets, they are competing with the cable companies who are doing very well with business services, and also improved their customer service with consumers and business customers.”
Read more from the early days of bankruptcy speculation.
Frontier Delays Interest Payments
We told you on March 17 how Frontier would defer its interest payments while discussing its $17.5 billion debt with creditors. This came as the company entered a two-month grace period while working on its financial restructuring. A Bloomberg report the week before said Frontier was preparing to file for Chapter 11 bankruptcy with a plan to cut its debt and give control of the company to its creditors.
Still, bankruptcy wasn't a foregone conclusion, because some analysts and experts believed that skipping the interest payments set up a bargaining timetable for the company to negotiate a different outcome. A debt-for-equity swap might be an alternative.
This is also when we learned that Frontier was divesting its Northwest operations, selling to private equity firms. More about that on slide nine.
Meantime, learn more about Frontier's options a month before filing for Chapter 11.
We told you on March 17 how Frontier would defer its interest payments while discussing its $17.5 billion debt with creditors. This came as the company entered a two-month grace period while working on its financial restructuring. A Bloomberg report the week before said Frontier was preparing to file for Chapter 11 bankruptcy with a plan to cut its debt and give control of the company to its creditors.
Still, bankruptcy wasn't a foregone conclusion, because some analysts and experts believed that skipping the interest payments set up a bargaining timetable for the company to negotiate a different outcome. A debt-for-equity swap might be an alternative.
This is also when we learned that Frontier was divesting its Northwest operations, selling to private equity firms. More about that on slide nine.
Meantime, learn more about Frontier's options a month before filing for Chapter 11.
Bankruptcy Likely Imminent
Frontier on April 1 described a restructuring plan that included filing for Chapter 11 bankruptcy later in the month. The company's most recent SEC filing said it was getting its creditors' input on the process.
The restructuring plan included transforming Frontier from a legacy services provider to a next-generation broadband service supplier. Fiber-based infrastructure would be at the core of its mission, leaving legacy copper behind.
Omdia analyst Brian Washburn told Channel Partners that the COVID-19 pandemic might slow the process a bit. But what matters most is that regardless of legal and financial battles, the business must remain "robust and sustainable," he said.
Read more about the proposed restructuring plan.
Frontier on April 1 described a restructuring plan that included filing for Chapter 11 bankruptcy later in the month. The company's most recent SEC filing said it was getting its creditors' input on the process.
The restructuring plan included transforming Frontier from a legacy services provider to a next-generation broadband service supplier. Fiber-based infrastructure would be at the core of its mission, leaving legacy copper behind.
Omdia analyst Brian Washburn told Channel Partners that the COVID-19 pandemic might slow the process a bit. But what matters most is that regardless of legal and financial battles, the business must remain "robust and sustainable," he said.
Read more about the proposed restructuring plan.
Chapter 11
It finally happened on April 15. Frontier said it filed Chapter 11 bankruptcy in an effort to cut its debt by more than $11 billion. Three in four company bondholders supported the decision.
“With this agreement with our bondholders, we can now focus on executing our strategy to drive operational efficiencies and position our business for long-term growth,” said Bernie Han, Frontier’s president and CEO, at the time.
Han said Frontier would continue to provide service to customers without interruption. And it would work with its business partners as usual throughout the court-supervised process.
Read more about filing day.
It finally happened on April 15. Frontier said it filed Chapter 11 bankruptcy in an effort to cut its debt by more than $11 billion. Three in four company bondholders supported the decision.
“With this agreement with our bondholders, we can now focus on executing our strategy to drive operational efficiencies and position our business for long-term growth,” said Bernie Han, Frontier’s president and CEO, at the time.
Han said Frontier would continue to provide service to customers without interruption. And it would work with its business partners as usual throughout the court-supervised process.
Read more about filing day.
Bankruptcy Was 'Fully Expected'
Bankruptcy came as no surprise to Rick Beckers, CEO of XaaS1, a cloud distributor that works with Frontier. In fact, Beckers has expected it for many years, not just the last few months when rumors have been swirling.
"They've reached that point in time where the scales are finally tipped against the continued operation of the copper network," Beckers told Channel Partners.
He said Frontier knew when it bought AT&T copper networks in various states seven years ago that the life of copper would only last so long. The time would come when it would cost too much to maintain. Or, customers would migrate to something that gets them more bang for their buck. And that's exactly what happened.
Read more about what led to the bankruptcy filing.
Bankruptcy came as no surprise to Rick Beckers, CEO of XaaS1, a cloud distributor that works with Frontier. In fact, Beckers has expected it for many years, not just the last few months when rumors have been swirling.
"They've reached that point in time where the scales are finally tipped against the continued operation of the copper network," Beckers told Channel Partners.
He said Frontier knew when it bought AT&T copper networks in various states seven years ago that the life of copper would only last so long. The time would come when it would cost too much to maintain. Or, customers would migrate to something that gets them more bang for their buck. And that's exactly what happened.
Read more about what led to the bankruptcy filing.
Commission Questions
Months ago, Frontier prepared its master-agent partners for the bankruptcy possibility. Most declined to comment to Channel Partners, but Telarus CEO Adam Edwards was the exception.
Edwards told us he's confident that Frontier will honor partner commissions.
“Frontier has expressed [that] the channel is a priority, and we believe this will play out in much the same way that the Windstream and Fusion bankruptcies have played out, meaning they’ll restructure their debt and will focus aggressively on growing revenue afterward," said Edwards. "The channel is critical to future sales growth and we look forward to playing a role in Frontier’s growth post bankruptcy.”
Months ago, Frontier prepared its master-agent partners for the bankruptcy possibility. Most declined to comment to Channel Partners, but Telarus CEO Adam Edwards was the exception.
Edwards told us he's confident that Frontier will honor partner commissions.
“Frontier has expressed [that] the channel is a priority, and we believe this will play out in much the same way that the Windstream and Fusion bankruptcies have played out, meaning they’ll restructure their debt and will focus aggressively on growing revenue afterward," said Edwards. "The channel is critical to future sales growth and we look forward to playing a role in Frontier’s growth post bankruptcy.”
Questions About Competitive Practices
A number of smaller internet providers accused Frontier of inaccurate broadband reporting. Frontier claimed it deployed 25/3 Mbps broadband in nearly 17,000 "census blocks," a stat that several organizations supporting small ISPs disputed.
This reporting is important because it impacts how internet service providers get money for future deployments. The FCC plans to distribute up to $16 billion to ISPs that commit to deploying broadband to areas without service of at least 25 Mbps downstream and 3 Mbps upstream. The funding comes from the Rural Digital Opportunity Fund, which the Commission introduced earlier this year.
Learn more about why Frontier's rural rivals weren't too happy with the company.
A number of smaller internet providers accused Frontier of inaccurate broadband reporting. Frontier claimed it deployed 25/3 Mbps broadband in nearly 17,000 "census blocks," a stat that several organizations supporting small ISPs disputed.
This reporting is important because it impacts how internet service providers get money for future deployments. The FCC plans to distribute up to $16 billion to ISPs that commit to deploying broadband to areas without service of at least 25 Mbps downstream and 3 Mbps upstream. The funding comes from the Rural Digital Opportunity Fund, which the Commission introduced earlier this year.
Learn more about why Frontier's rural rivals weren't too happy with the company.
Ziply Fiber Takes Over
As part of its bankruptcy proceedings, Frontier sold its Northwest operations and assets to WaveDivision Capital and Searchlight Capital Partners. The $1.35 billion deal puts Ziply Fiber, a new company, in charge in Washington, Oregon, Idaho and Montana.
Ziply is spending $500 million to improve network and service. It has 500,000 customers across the four states and nearly 1,000 employees.
The company is "actively working through a partner program and considering how to best do that." So says CEO Harold Zeitz.
Learn more about the transaction.
As part of its bankruptcy proceedings, Frontier sold its Northwest operations and assets to WaveDivision Capital and Searchlight Capital Partners. The $1.35 billion deal puts Ziply Fiber, a new company, in charge in Washington, Oregon, Idaho and Montana.
Ziply is spending $500 million to improve network and service. It has 500,000 customers across the four states and nearly 1,000 employees.
The company is "actively working through a partner program and considering how to best do that." So says CEO Harold Zeitz.
Learn more about the transaction.
Reader Comments
Channel Partners readers aren't yet convinced that Ziply will be an upgrade from Frontier's service.
While most of the comments on our story are from consumers, and not business users, it's clear Ziply has an uphill road in the public relations game. Here's a sampling:
Channel Partners readers aren't yet convinced that Ziply will be an upgrade from Frontier's service.
While most of the comments on our story are from consumers, and not business users, it's clear Ziply has an uphill road in the public relations game. Here's a sampling:
- "Frontier overbilled me and transfers me to Ziply Fiber, whom transfers me to Frontier, whom transfers me back Ziply. I am angry."
- "Ziply requires users to set up bill pay on their website, giving them your bank account information. They don’t provide their billing zip code so you can set them up as a payee in your bank bill pay account. As a former banker, this leaves me wondering what their practice has been in taking money from customer accounts in the past."
- "Absolutely terrible company cut off my internet status with no warning!!!!"
- "I didn’t think that Frontier could get any worse, but you folks are proving me wrong."
- "Ziply charges $35/$40 for the same service that Frontier charges me $68. So now ziply will be taking $68 a month for service that costs $40? No, I don’t think so."
- "Is this what I is to be expected from Ziply, I went from a slow download speed of 5Mb to 3Mb. I pay for 50Mb. This is not acceptable and needs to be addressed immediately."
as a Connecticut customer and UConn husky woman basket ball fan I felt very poorly you stopped sny in this area but kept big 12 or ten that is useless here as a lot of your sport channels are need to set real priorties and not a lot of you have all these channels for you to look good
The Frontier issue began when they purchased Verizon at stock values. If the would have done real due diligence they would have found that Verizon had not maintained any of their facilities at least in the Midwest and had furnished zero internet in the rural areas.Frontier spent a ton of money correcting these problems. I made the comment when the purchased was announced, sure hope Frontier did their homework. But they did not.
I wish them success in this restructure. Here in rural Michigan they have been a a much better service than current end users options here.
Maybe we the consumer should be told what is going on instead just keep raking in money. Both of my remotes FOR TVs went out last night. Now they SOLD me two new ones for $15 each FOR something they are not going to use anymore because TVs I’ll not be covered in their plans anymore selling out TO some other company I guess. This is a bunch of BS but no one covers this area except one and that one was down more than it was UP. If they DON’T cover TV anymore we should be told BUT they are like any other big company, will tell employees and consumers as they walk out the door SORRY!