Frontier Communications, the provider of telecom services in 29 states, reportedly is moving closer to filing chapter 11 bankruptcy as it struggles with a $17.5 billion debt load.

Frontier is asking creditors to help craft a turnaround deal that includes filing for bankruptcy by the middle of March, according to Bloomberg, citing people “with knowledge of the matter.” Company executives including Bernie Han, Frontier’s new CEO, met with creditors and advisers, and told them the company wants to negotiate a prepackaged agreement before $356 million of debt payments come due March 15, it said.

Javier Mendoza, Frontier’s vice president of corporate communications and external affairs, tells Channel Partners his company’s business and operations are “solid and serving our customers remains our top priority.”

Frontier’s Javier Mendoza

“As we have said publicly, Frontier is evaluating its capital structure with an eye to reducing debt and interest expense so as to be able to better serve our customers,” he said. “Our customers should expect no changes as we remain focused on providing quality communications services.”

Mike Sapien, Ovum’s vice president and chief analyst of enterprise services, said Frontier has multiple operations and customer-service issues compounded by large acquisitions from AT&T and Verizon. These acquisitions brought scale issues and new regulatory concerns, he said.

“Given their debt, it seems likely that bankruptcy is the only way out of their current state,” Sapien said. “The March due date seems like to force them into bankruptcy unless they can negotiate something with their large creditors, which is very difficult to manage. Threatening bankruptcy is the only way to get the large creditors to seriously negotiate better terms for Frontier. But there are many moving parts, including managing regulatory pressure from the various state public utility commissions (PUCs). Layer on numerous complaints from customers or outages, or poor service, and this looks like a recipe heading toward bankruptcy for Frontier.”

Ovum’s Mike Sapien

Frontier’s customer service reputation has been “very poor,” and PUCs requiring improvements and additional investments will further strain Frontier’s budget, Sapien said.

“Given their situation, new services and complex business services become almost impossible to support,” he said. “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.”

For its third quarter, Frontier reported a net loss of $345 million, compared to a loss of $426 million in the year-ago quarter. The losses were primarily due to $276 million in goodwill impairment charges, as well as an additional $30 million loss on the sale of operations in Washington, Oregon, Idaho and Montana to WaveDivision Capital with Searchlight Capital Partners.