Good morning. My name is Julie, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Consolidated Communications Holdings, Inc. Fourth Quarter 2017 Results Conference Call. [Operator Instructions] Please be aware that this call is being recorded. Thank you.

Lisa Hood, Treasurer and Vice President of Investor Relations, you may begin..

Thank you, and good morning, everyone. We appreciate you joining us today for our fourth quarter earnings call. On the call with me today are Bob Udell, President and Chief Executive Officer; and Steve Childers, Chief Financial Officer. After our prepared remarks, we will open the call up for questions.

Please review the safe harbor provisions in our press release and in our SEC filings. Today's discussion includes statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties.

A discussion of factors that may affect future results is contained in Consolidated's filings with the SEC, which are available on our website. Today’s discussion will include certain non-GAAP financial measures. Our earnings release has been posted on the Investor Relations section of our website at consolidated.com.

It does include reconciliations of these measures to their nearest GAAP equivalents. And with that, I will turn the call over to Bob Udell..

Thank you, Lisa, and good morning everyone. We have a lot of exciting news to share with you today. Effective February 20, we have launched our rebranding and we are now Consolidated Communications' across all of our markets.

I am very proud and pleased with the progress we've made throughout 2017 as we executed on key priorities and made significant advances with our broadband and business growth strategy.

We are off to a great start on closing, integrating and operating FairPoint which most of you know was a transformational transaction that doubled the size of the company.

Through our due diligence and work earlier in the year, we were well-positioned to immediately begin integration, focus on alignment of the organization, and execute on fast start customer and network initiatives.

We are recognizing the immediate financial, operational and capital structure benefits of the merger, as well increased scale becoming a top 10 fiber providers in the U.S.

We made great progress with our fast start initiatives which have already improved the business including redeployment of staff and augmenting technology allowing us to improve call-center answer times by over 40%.

We refocused policies and call handling procedures dramatically improved handle times and we enhanced the customer installation experience by deploying new WiFi signal quality testers. Just last week we announced our plans to increase broadband speeds to over 500,000 residents and small businesses across our Northern New England service area.

We have aggressive plans to expand on fiber network to achieve higher speed resulting in increased broadband and network reliability. In fact, nearly 84% of these locations will see their top speed capability nearly triple. As a results of our investment in the fiber network, hundred thousand customers will be able to get speed to 1 gig.

The majority will quality for speeds between 20 and 100 meg. Even better, we are able to complete these speed upgrades and support our current commercial and carrier success-based projects while keeping our capital intensity to approximately 17% of our operating revenue.

This is mostly due to the quality of the fiber network we acquired with the FairPoint transaction. In addition to upgrading broadband speeds and overall investments in the network, we're expanding and enhancing our commercial products and services.

You may now we recently announced the expansion of enterprise business services across Northern New England including, premise hardware virtualization which is a cloud-based routing solution that provides scalability and built-in geographic diversity and benign service mitigation product that solves data security and business continuity challenges for our customers.

We are also launching our suite of cloud services MPLS and SDWAN in Northern New England during the second quarter of 2018. We are very excited about the many benefits we’ll offer businesses with these solutions and how this fits with our competitive sales approach focused on solving business problems for our customers.

We have made great progress on our fast start initiatives and integration. We remain focused on achieving our synergy target of $55 million within two years of closing while improving the customer experience and gaining operational efficiency.

As of the end of fourth quarter, we have recognized over $30 million in cumulative run rate synergies which is ahead of our original plan. We have a disciplined and proving approach to integration. We recently completed two major milestones.

First, we successfully integrated the FairPoint or converted the FairPoint to our ERP and financial reporting system effective January 1. We are now operating on a single fully integrated platform for finance, supply chain, and human resource functions.

Second, we are pleased to just launch the Consolidated Communications brand across all former FairPoint markets in the 17 states. This rebranding signifies a new day and a fresh start.

We are committed to making this transition a seamless experience for our customers and we are already in the early stages of rolling out new and enhanced services to residential and business customers. I want to thank our employees who have come together as one strong team.

We share an unwavering commitment to provide reliable services and a better customer experience. I'm impressed by our employees dedication to constant improvement in the combined skills and expertise of our newly combined team. Now let me turn to the three customer channels.

First, within commercial and carrier, data and transport revenues are up 1.4% on a year-over-year basis.

Within the commercial channel, we have had some nice sales wins during the past quarter including a new 20-site MPLS network number Minnesota, data center sales in Kansas and Northern New England, and sales of our cloud secure and cloud disaster recovery services.

These sales all represent sizeable monthly recurring revenues and are all primarily new products for the former FairPoint markets where we see solid sales opportunities. In addition to the new product launches, we are adding resources to support our small and medium business customers.

We see great opportunity to provide more value to SMB customers who benefit directly from the speed increases and ultimately drive increased ARPU, reduced churn and win back of market share. We've integrated our carrier sales teams and are excited about the depth of experience and strong business relationships within this combined team.

An example of a recent win, was a contract signed in January to install carrier services to 68 new towers in Maine which was previously served by incumbent cable provider. This same carrier ordered upgrades to 114 towers in Minnesota and Illinois, showing the benefits of our scale.

Including the January sale, our total number of connected towers under contract had increased to over 2700. Turning to our consumer channel, we have already discussed our plans to upgrade 0.5 million addresses. Our legacy Consolidated network enables us by example to deliver speed to 50 meg or higher to 89% of broadband capable homes.

These higher-speed services drive higher consumer value and over the past year, we have increased our legacy consolidated consumer ARPU by 7%. We expect to see similar impact in the former FairPoint markets as we implement our fiber network improvements. As such, increasing broadband speeds will continue to be a top priority.

Turning to our consumer video offering, we are focused on delivering more profitable TV product and expanding our over-the-top content offerings. In December, we became the first provider to strike an agreement to offer fuboTV, a leading live sports streaming TV service bringing in very robust content line to the Consolidated customers.

Also in the fourth quarter, we launched HBO NOW, giving our customers access to one of the most in demand standalone streaming services. And finally yesterday we announced a new partnership with DirecTV Now. Let me tell you what this means.

We can now offer streaming video service including breaking news sports and live events to all Consolidated residential customers throughout our entire service area. This partnership is an extension of our digital entertainment and broadband strategies allowing us to deemphasize and move customers away from capital intensive linear TV.

Approximately 75% of our total revenue is still from business and broadband services. We are intensely focused on increasing our strategic broadband and business revenue to offset legacy declines, and we continue to target network investments which deliver high bandwidth services over our fiber infrastructure.

Now I will turn the call over to Steve for the financial review.

Steve?.

Thanks Bob, and good morning to everyone. This morning I will review our fourth quarter financial results compared to the pro forma results for the same quarter last year as if we had closed in the FairPoint acquisition January 1, 2017. I'll also provide financial guidance for full-year 2018.

Operating revenues for the fourth quarter were $356.4 million down 4.8% compared to adjusted revenue of $374.5 million a year ago after excluding $5.4 million revenue associated with the 2016 divesture of our non-core low margin equipment sales and IT services business.

As expected, erosion of voice and access revenues make up the vast majority of the year-over-year decline. In the fourth quarter, commercial and carrier revenue decreased $2.5 million to $152 million. We did shown nice growth in data and transport as the revenue increased $1.2 million or 1.4%.

Legacy CCI data and transport revenue grew 4.1% while FairPoint decreased 2.5%. The FairPoint decline is largely attributable to continued price compression associated with large carrier contract in churn and the SMB space. These are areas our fast-start initiatives will begin to address.

In addition, our expanded cloud and POS services generated year-over-year revenue growth of 20.4% and we plan to launch this product suite in the FairPoint market in 2018. Voice revenue was down $3.5 million or 5.9% while other revenue was flat.

Overall, we are seeing growth within our commercial data and transport revenues which is offset by carrier revenue declines.

We had laid a foundation during 2017 positioning us to launch new products in FairPoint Northern New England market and by applying the Consolidated playbook, we do expect to see stabilization in the former FairPoint markets in 2018.

Consumer revenue was down $7.3 million for the quarter, voice revenues were down $5.9 million with the majority of the decline coming from FairPoint. In the aggregate, consumer broadband increased slightly in the fourth quarter.

Some of the broadband growth realized earlier during 2017 is being offset in the fourth quarter due to seasonality in the Northern New England market.

We estimate the impact of seasonality contributed approximately $2.2 million to the overall decline in Q4 consumer revenue with $1.2 million impacting broadband and $1.1 million going against voice revenues.

Additionally, beginning this quarter we have split out video consumer revenues from broadband in order to isolate the decline in revenue trends in video. We expect this trend to continue as we encourage our customers to transition from linear video products to over-the-top streaming video content which complements our broadband strategies.

For the quarter, video revenues declined $1.6 million as compared to the same quarter 2016. Subsidies and access revenue were down $7.9 million. The 2017 step down in CAF II transition funding accounted for $2.1 million of the decline while the remainder came from ongoing declines in network access.

Operating expenses exclusive depreciation, amortization, postretirement benefit, pension expenses were $240.4 million compared to $250.4 million for the same quarter last year.

Again after adjusting for $5.7 million associated with the divesture of equipment business, the remaining year-over-year decline of $10 million is primarily the result of cost saving from realizing corporate network and operational efficiencies associated with the FairPoint merger.

Net interest expense for the quarter was $29.9 million compared to $29.3 million pro forma interest expense for the fourth quarter 2016. Other income net was $8.4 million as compared to $9.8 million in the prior year. Cash distributions from our Verizon wireless partnerships in the quarter were $8 million as compared to $8.9 million a year ago.

For the first quarter of 2018, we do expect to receive cash distributions of $9.5 million when we received $5.6 million for the first quarter of 2017. Our first quarter distribution does include a prior-year true up of $2.4 million associated with the accounting for prepaid data roaming within Verizon.

We continue to expect our wireless distributions to be in the range between $30 million and $32 million per year. In the quarter, we recorded $112.9 million non-cash tax benefit due to the Tax Cuts and Jobs Act for 2017 which was enacted December 22, 2017.

The tax benefit reflects the impact of the remeasurement of our deferred tax assets and liabilities to a lower corporate rate at which they are expected to reverse. In addition to reducing the federal tax rate of 21%, the tax reform legislation allows for 100% immediate expensing of capital assets for the next five years.

Net-net, the tax reform will extend the time period before we expect to be a federal cash taxpayer from two to three years to four to five years. Adjusted EBITDA was $133.2 million in the fourth quarter compared to $138.3 million a year ago.

The year-over-year decline is due to loss of high margin voice and regulated revenues and lower wireless distributions which was partially offset by the growth and business and broadband revenues. In the fourth quarter, CapEx was $61.9 million or 17.4% of revenue.

We see opportunities for success-based in network growth projects to leverage investment broadband business and carrier customer channels across all of our markets. From a liquidity standpoint, we ended the quarter with approximately $15.7 million of cash on hand and $88 million available under our revolver.

For the fourth quarter, our total net leverage ratio on a pro forma basis was 4.34 times. After adjusting for our full synergy target, the net leverage ratio would approximate at four times. We have an attractive capital structure with a low cost of debt and no maturities until 2022.

In response, the recent movement in interest rates - we recently executed an additional floating to fixed rate interest swaps increasing our percentage of fixed debt to 75% from 50%. Given effect of this additional hedge, our average cost of debt is now 5.22% on a pretax basis.

The additional hedges enhanced the certainty of future cash flow and the stability of our dividend. Cash available to pay dividends was $42.5 million resulting in a strong dividend payout ratio of 64.6% for the quarter.

The FairPoint acquisition significantly improve our dividend coverage as this transaction gives us access to FairPoint's already strong cash flow, the benefits of synergies, significantly improve financing terms, and a tax shield of their NOLs.

Our Board of Directors declared the 51st consecutive quarterly dividend of approximately $0.39 per common share payable on May 1 to shareholders of record on April 15. Now let me provide an overview of our 2018 guidance. We expect cash interest cost to be in the range of $123 million to $228 million.

Our estimates for 2018 are based on our current capital structure, our portfolio of interest rate swaps and the forward-looking LIBOR curves.

Cash interest income taxes are expected to be $1 million to $3 million, as we will pay some state and local taxes but for federal cash taxes, we will be shielded by current NOLs as well as the benefit of tax reform. Finally, we expect capital expenditures to be in the range of $235 million to $245 million.

During 2018, we will focus investments on our fast-start initiatives in FairPoint markets, as well success base to support fiber expansion and broadband speed upgrades across all of our markets. We expect our capital intensity to be approximately 17% of revenues. With that, I'll now turn the call back over to Bob for closing remarks..

Thank you, Steve. In summary I'm confident in our ability to execute on our strategy and to effectively integrate the FairPoint operations realizing that many benefits at the combined company.

There have been no surprises and we are even more excited about the business combination which strengthens our cash flows, provide for increased capital flexibility and significantly expands our fiber footprint. We expect a seamless integration and are already delivering an improved experience for customers.

We intend to fully leverage our increase scale, resources and expand fiber network to continue to bring great benefits to our customers. We are excited about what's to come.

We're committed to also delivering value to our shareholders through our long standing dividend and we’re focused on the long term, building an even stronger and more competitive company as we invest for the future and grow our strategic revenues. Thanks for taking the time to join our call today and we'll now take questions.

Julie?.

[Operator Instructions] Your first question comes from the line of Frank Louthan from Raymond James. Frank, your line is now open..

I'm just a follow up on your last point there about the dividend, talk to us little bit how you view the dividend? And it doesn't sound like you're considering a modification, like some of your peers have and why do you think your position is different from theirs and how do you view that? And then, I want to get a little more clarity on the DirecTV Now, application or are you pushing that through your set-top box apps or are you adding - you have a Roku or Firestick promotion and how extensively can you push that out into the FairPoint territories? Thanks..

First regarding the dividend, let me be clear we have never been in a better position from a dividend payout ratio while also giving great flexibility for significant investment in expanding our fiber network. So you look at 17% of operating revenues going back into CapEx.

The success base projects especially in commercial and carrier that passed additional, even residential and new opportunities were in excellent position. So the return on capital commitment currently been to our shareholder is incredibly important to us and we see no reason to change that strategy.

Related to DirecTV, it will be a Roku like device that we use to a promo and there will be no set-top box and that's the key advantage of filling out our over-the-top TV offering it.

It positioned us well to reallocate that CapEx and continue to expand speeds and focus on making technology easy for our customers to use versus a set top box installation complicated process..

Is there a cut off, is there a certain level of speed customer that you’re not necessarily promoting this to or is this going to be pushed out to all customers and any update, any information on the economics to you guys come from that relationship would be would be helpful?.

Yes, I can’t go into the economics of it. Let us get a little more experience with it, first. But other than the obvious economics of the set-top box offset and the more efficient self install that comes with it but the bottom line is, it's available to all of our broadband customers. The key is we are focused on expanding speeds through our history.

And so, our footprint in the consolidated legacy areas which is a great example of what we're pursuing with the upgrades we just announced in the FairPoint area is, with a 90% 50 meg accessible footprint we have no areas where we won’t offer the DirecTV Now..

Your next question comes from line of Jon Charbonneau from Cowen and Company. Jon, your line is now open..

Your data and transport business grew 1.4% year-over-year versus I believe flat growth last quarter. Can you talk a little bit more about what the big drivers where are the improvement and how do you recommend we think about growth within that segment over the next couple of quarters? Thank you..

The main drivers in data and transport are a couple things, one, certainly the Metro Ethernet focus and that being our lead product in our consultative sales strategy and with higher cloud adoption we've seen continued momentum in Metro Ethernet.

And so when you look at overall growth, I think the real pressure on data and transport because we've realized twice that growth in historical years for Consolidated has been some pressure on wireless backhaul and price compression around those contracts which we've leveraged into renegotiating additional sites, like we've announced recently or even on this call.

So if you break it down into year-over-year Metro Ethernet’s been almost a 7% increase. Cloud has been 10% increase year-to-date and I'd say those are the major drivers..

Your next question comes from the line of John Kim from [indiscernible]. John, your line is now open..

I was wondering given the amount of progress you've made already on the synergy target.

Is there an opportunity this year to potentially increase the target synergy amount form 55 million?.

That's a natural question and so I did anticipate, that's an obvious place to go, but it's too early. Right now, what we're really focused on is, those projects that both deliver synergies and a better experience for customers.

And so, with our continued reinvestment in marketing, sales resources I think it's too early to call a win or on an over achievement but we're going to deliver one if at all possible..

Your next question comes from the line of Michael Rollins from Citi. Michael, your line is open..

Curious, in 2018 what you’re going to expect the dividend payout to be percentage wise a definition or turn that you call cash flow available to pay dividend, is your CAPD?.

Yes, I think Mike, the way to think about it is, and we give you a lot of ways to triangulate towards that from CapEx and taxes interest.

The way to think about it is, we're targeting the mid 60s, and I used to be comfortable with a 70% if I saw investment that made sense from a capital perspective, with this larger scale, there's no reason we shouldn't be able to remain in the mid 60s and still invest in every good capital return project that we identify..

And secondly, in addition to the synergies are there opportunities for further cost cutting in 2018 streamlining operation that are in your heritage portfolio of the FairPoint portfolio?.

I am not sure I understand the question.

Is there synergy upside or natural - are you referring to the business at large continued efficiencies that come from scale?.

I guess either so in addition to synergy that you set, are there additional opportunity cut cost either side of the business, heritage or the FairPoint operation?.

I think we're always looking at cost efficiency opportunities and those real scale efficiencies typically come after our two year integration period. So, I hate to sound like I'm repeating myself, but I really think our synergy guidance is good for now. We've accelerated some things because we sold the window of opportunity to do so.

We'll continue to do that. But I'm hedging a bit because I continue to invest back in the business in order to stimulate revenue through marketing and sales resources. So, it's a little too early to target or be specific on any wins around synergy acceleration..

Your next question comes from the line of Amy Ecker from HPS Partners. Amy, your line is now open..

The pro forma adjusted EBITDA number given which is that include for realized synergies?.

So thanks for the question on the realized synergies Bob mentioned that we have – ending the year we are on track for cumulative run rate synergies of 30 million. And I guess I don’t know the exact number that we would say would be realized. I’d probably say maybe a third of that is already factored in maybe a little bit more.

Because remember we got – as you think about as the way we think about the whole $55 million we probably got 20% plus of that at closing with getting to one management team showing certain facilities. We remain duly positioned and everything else since then has been sort of incremental either based on integration or just aligning the organizations.

So I’ll give you a conservative estimate or maybe a third of this factored in give or take a little bit..

So about 10 million included in the 536 million?.

Yes..

And then the changes that you’re making in the FairPoint footprint the announcements that you made on speeds earlier.

When do you expect those to be completed?.

Amy this is Bob Udell thanks for the question. Most of the speed - actually most I’ll tell you 95% will be completed by August and there will be rolling out improvements actually are beginning this quarter. But we’ll really pick up steam in the middle part of second quarter with most of them being completed by the end of the third..

Your next question comes from the line of David Tawil from Maglan. David your line is now open..

I wanted to ask thank you for the guidance for 2018 on some of the costs and expenses.

When we think about projecting revenue and EBITDA for 2018 can you talk about not in terms of specific number but can you talk about how we should think about the bunch of the moving parts how much opportunity is there in the FairPoint assets to go ahead an increase revenue.

What lines in particular how should we think about the bump in the Verizon wireless coming in the first quarter couple of the other kind of little things here and there that will help us kind of guide to what expectations are for the topline?.

I'll try and Bob can jump in if needed. So the way I would think about is – the guidance that we’ve given are cash interest CapEx cash taxes that's consistent with our philosophy and guidance as we went public in 2005.

But I guess the things that I would also call out we are not given specific revenue guidance or adjusted EBITDA guidance but what I would. I think you could infer is that we basically gave the ranges for CapEx we called out that we expect our capital intensity number should be around 17%. So I think you kind of backed into the number there.

Bob mentioned that our targeted payout ratio is to be 65% on an annualized basis so I think – kind of backed into the number that way. But the way I would think about if you look – for revenue specifically if you look at 2016 to 2017 on a pro forma basis.

We’re down roughly 4% and again where we’re at right now consolidated maybe had a little bit stronger on the commercial carrier side as stronger consumer broadband on a FairPoint side. I think there is a lot of opportunity with the new sales team, the sales leadership and the products that we’re rolling out.

So I think I would kind of start with 4% number and Bob mentioned it’s going to take us a while to get all the fast start network extensions out in the market to really take advantage of. But I would start a 4% and kind of work your way down in what you think incremental improvement would be.

If you look through the revenue tables we have there I would expect to see growth on the data and transport line, in commercial and carrier, that’s where we’re investing in the business both from a sales resource, customer service standpoint, a network standpoint.

We with the FairPoint transaction we did pick up and did more voice revenue which we have to kind of work our way through. But there is also with the fast start initiatives. We also think there is quite a bit of upside in the broadband speed.

So I think look for growth in commercial, data and transport, consumer broadband and kind of look at videos sort of be in the same sort of run rate that we've had.

We’re potentially migrating customers from linear, video, over the top hoping to get faster broadband speeds or for those customer in extending their relationship that voice is going to continue hopefully to a road hopefully we can slow that down a little bit but that’s the way I would think about it.

The subsidies are kind of based on the normal step downs we have one more CAF II step down in 2018, network access kind of well at same pace hopefully a little bit slower but again net-net there were a lot of moving parts in it but I would start at 4% assume it’s going to be some improvement in the number look that way..

And then just one question on the bottom line it seems like the companies has a fair amount of cash on hand has access to fair amount of liquidity should be generating some pretty good net free cash flow over the next 12 months.

And vis-à-vis the company planned or structured has companies thought about best use of those liquidity options vis-à-vis the debt of the company. I mean its currently trading mid to high 80s and maybe there is an opportunity go ahead and retire some debt at discount at this point..

We have constant dialogue with the Board around capital allocation and the way to think about cash at least that we do is. If you have debt that doesn’t expire till 2022 and you’re buying it back you're saying you don't need access to that cash I think you point in the future between now and the refinance.

And we may continue to look at acquisition tuck-in targets. We want to keep our options open for expanding and growing the business. So I hear you, and we continue to think about those options, but we think and still see the best return being organic expansion of fiber and expanding what we do well making sense out of technology for our customer..

Listen, you guys think that the growth CapEx or the growth acquisition is better spend and return on capital are moving forward. I just wanted to make sure that those thoughts are being passed around..

Your next question comes from the line of Scott Goldman from Jefferies. Scott your line is now open..

Actually had a few if I could hopefully on the smaller side but can you give a sense for what we're seeing around customer gross add and customer churn in FairPoint territory. Since you've closed the deal presumably that should those metrics should improve with rebranding and investments and speed.

We are just wondering what you have seen in the first five or six months you know what has been since closing. Second maybe you talk a little bit about some of the impacts we’ve seen in the past have been around carrier price compression that have eaten at the commercial and carrier side.

How far along you think we are in that process have we seen any of that abating. And then lastly if you could just talk a little bit about what your consumer pricing strategy may be now that were in 2018 any plan price increases or changes in the pricing structure? Thanks..

I'm going to take the consumer pieces together on data ads and the pricing strategy and then I’ll get to the carrier piece.

With regards to FairPoint notwithstanding the seasonality things that we talked about, when you look at of the decrease in data of DSL customers quarter-over-quarter, we feel like that our strategy has started to impact that and we've at least reduced that decline by about 25%.

And so, the real - year-over-year, the real impact is going to be the speed upgrades and that gets to the pricing strategy. We are using a proven bundle strategy that we have that really leverages both the speed and then our unified portal platform for unified login for our customers.

And that platform drives the customer into using more services including over-the-top content through unified authentication. And it puts us in a better service position with the customer. And our install is typically done such that, we made sure that there is Wi-Fi coverage in the structure. So that's been that's been our niche.

In the final comment around the consumer strategy is all bandwidth isn't treated equal. One of the things that we've had great experience with is in prioritizing the traffic and making sure that when customers are doing something they require real time connectivity, that’s prioritized higher.

Not all of our competitors do that and that helps us compete with speed sometimes that our advertise lower than what the competition advertises. The average utilizations still in the 10 meg range and hasn't been growing much faster over the last year.

So we're in a good position with that product and we price competitively with some typical offers like gift cards and things like that where it's required. On the commercial side - or the carrier, I am sorry, we continue to work through that squeeze from a price compression perspective but are doing so in a way that allows us to acquire new sites.

We announced a number of new sites, actually 68 newly signed in January in addition to the 50 plus that we have in the pipeline from fourth quarter. And so we're seeing that pick back up.

We did write down another contract in fourth quarter about 1.4 million and it's just in that period between retroactive or impacting the existing rates and bandwidth, while we have a lag to the additional new towers that we're adding.

So I think we're in terms of how far through that price compression impact, I think we're in the seventh or eighth inning. We have some things still to work through in 2018. But I believe, we've got enough momentum in new opportunity to offset that. So I would see it being locally relatively flat in terms of impact..

Your next question comes from the line of [Robert Strougo from Maris Investments]. Robert, your line is now open..

Our stock is taking quite a hit and our return is close to 13%. Thank God, you've been so good on this conference call that the stock is up over a $1 right now. When I look at opportunities stock yielding 13%, the thought is why shouldn't the Board try to buy some of that stock back to reassure investors that you do have a viable plan for the future.

Especially with what's going on in the in the market there, hysteria over all sides, it's a 13% percent yield, what's your thoughts on that? Can you divest of some of your assets to capture some of that value in the stock?.

Yes, from a personal perspective that's something that you can look back in insider buying and that's been happening with our board and a couple of our management team. So, we obviously believe that's a great return. In terms of use of corporate capital, I think I've answered that question.

We believe that strengthening the long term business versus short term, jockeying over the capital structure is what fits are our strategy and long term shareholder returns..

[Operator Instruction] Our next question comes from the line of Davis Hebert from Wells Fargo Securities. Davis, your line is open..

I wanted to ask about the performance of your broadband customer base in the quarter.

Certainly better than your peers, but just wanted to ask about how the performance was in the Legacy FairPoint footprint versus the Legacy consolidated footprint?.

I thought, I mentioned earlier and if I didn't here let me get very specific. FairPoint was down on Legacy FairPoint in terms of broadband connections and that's largely due to two things. One there hasn't been much proactive marketing in the areas where speeds are high.

There's seasonality impact of kind of Snowbird effect and we've made some improvements for the future on helping those customers spend versus disconnect which affects that seasonality. And finally, I think the speed upgrades are an indication that we've got some work to do there.

And so 500,000 passing or we're going to more than triple speeds for - over 80% of those customers is that an indication that we're having more opportunity for improving that same time in 2018?.

And it might be helpful if you could breakout your current market share in the FairPoint footprint? And how that compares to where your target might be.

Whether that's a penetration rate or something to that degree?.

Let me let me give you an example of Legacy consolidating areas, where we have 100 meg or higher, we're in the 35% penetration range. Across all of FairPoint, we see you know a little over 15% penetration. So we see excellent opportunity for penetration improvements just by that comparison..

And could you help us with, I mean you're upgrading your speeds currently.

What would you say the lag time would be between the actual speed upgrade and where you market and actually start seeing some broadband customer growth?.

Well, let me break it down to just an example, where we do a node upgrade we're canvassing that neighborhood like the old days when cable TV rolled out. We're going door to door and doing community promotions. So I think the way to look at it is, the lag time between when it's upgraded and we're bringing in customers and selling customers is very low.

I mean these days and maybe a couple of weeks. In terms of the revenue impact it's been 30 days later. So I will see a progressive impact throughout the year with more of it coming in the summer months as soon we make progress..

Would it be fair to say, you would expect broadband customer growth for the full year 2018 versus 2017?.

Yes, I'm not certain that I can see that. I think it's - I think you're going to see a lift in ARPU and certainly revenue and at least a slow decline because remember we've got a declining consumer base that we're mitigating the decline on.

But in terms of the broadband only line, I think we'll see improvement there and I think towards the end of the year, once we realize the benefit across the whole footprint then we'll have a better feel for are we going to see net adds across the Northern New England and FairPoint Legacy markets.

But we're certainly putting ourselves in a good position to realize..

And just one last balance sheet question. I know someone earlier asked about potential bond buybacks, but is there anything else you guys are looking at that could somehow accelerate the pace of deleveraging of its asset sales, maybe some none core markets.

Anything to that degree that could give debt-holders a little bit more comfort here?.

Well I think the place to start is you look at the robustness of the assets and over the transaction fees associated with the deal. I see us in a much better position to continue through synergies and improvements in the business to realize better leverage ratio. That's certainly our focus..

And Dave, I would just pile on to that, I'm just going back to what I said in the prepared remarks, I mean compared to other people in the peer group. We have a very attractive capital structure, there is no maturity since 2022. We just significantly increased our minimizing the floating rate risk that we're attacking with the additional hedges.

I think we have very attractive cost of capital. So I mean I hope people to comfort that this is a different quality of asset, operating team and opportunity relative to maybe some of the people in the peer group that remain benchmark..

Your next question comes from the line of Jennifer Fritzsche from Wells Fargo. Your line is open..

I wanted to ask the inevitable M&A question. I know you certainly have your plate full right now. Just given on the heels of just acquiring a large asset, so if I look back to metro connect and listening to some of the fiber conference, we were in Miami there were some assets there which cling to be for sale and we’ve seen some trade in the high teen.

Are your shocked by some of the multiples being paid right now or is it something you're looking at everything.

Or your heads and we won't look it for two years as been your history?.

First off maximizing the value of the FairPoint fiber asset is job one. And leveraging the fiber we have across the rest of our markets is near equal with that.

So we’re going to continue to focus on that but two things one, we're always interested opportunistically in tuck-in assets, the build versus by decision if we can buy an asset that give us fast to return and building it we'll certainly consider that and pursue that.

With regards to the multiples, it's amazing to me the private market multiple is being paid for companies when comparably cash flow net positive companies are trading at public arena at a comparably lower multiple.

So, I think that makes the rush to a fiber asset bidding process less attractive and we're going to have to let that bubble pass but there are some assets where people look at what the lively outcome is of the deal and we can - and that’s our preferred buyer which happened in the past and I think there is opportunities for that to happen yes..

If I may one more, I just wanted to ask so your backlog is going to focus the conservation for a lot of companies.

Can you quantify the remaining likes of your contracts you are seeing there and just maybe activity you are seeing from the carrier themselves?.

Yes, let me talk about the activity we’re seeing. I think we went through a period of time where there was a lot of RFI activity carriers looking at different type of scenarios for small cell that has passed and in first quarter we're seeing more of those contracts being let, and so we're again in the stage now where I see momentum building.

And as a market we had to adjust to the pricing compression that came really - because of the catalyst of unwanted wireless bundles. And so now as the market adjusting to that we feel and we’ve adjusted to it, we feel very well positioned with our scale to capture that opportunity.

And so when you look at what exposure remaining for us, well there is a few contracts we have yet to work through in 2018. We think there's equal amount of opportunity to offset any impact we might feel on the carrier side.

However there may be few months lag between like we saw in the fourth quarter a contract rewrite and the install of the new sites. So we’ll continue try and mitigate that and work through that in 2018..

So is it fair to say the sense of urgency you’re seeing from carriers to deploy fiber because you have all four wireless carriers now spending is being seen is that a fair statement which I assume is good for companies like you?.

Yes, I think that is a fair statement - again I’ll comment on fourth quarter, we've seen the activity pick up and contracts being led and we're in discussions in competitive negotiations in a number of cities now where I think the contract are actually going to get let and signed.

So I feel like the activity is definitely exponentially more right now versus the enquiry mode without corresponding fuels that we saw through early last year..

Our next question comes from the line of Arun Seshadri from Credit Suisse. Arun, your line is open..

I want to ask you some questions that you may or may not want to answer, but I'll ask it anyway. Just wanted to get a sense, if you look at broadly pro forma revenue for 2017, you've done significantly better in Q3 and Q4 and in sort of reducing that year-over-year pro forma decline.

Just wanted to get a sense for broadly speaking, I mean, I guess, your expectation would be to do better than the full year pro forma 2017 impact.

And then is there any way you could kind of, at a very high-level, look at - share with us, if you haven't already - if you have already, I'm sorry I missed it - just between the FairPoint properties and the legacy CNSL properties, what those numbers would have been.

And high-level, sort of would it be fair to expect some level of improvement for the full year more akin to what we've seen in the last couple of quarters?.

Maybe you missed the earlier conversation when we’re talking about revenues. I won’t repeat all of that. I’m happy to talk to you offline about as we want to drag everybody else through it. But basically if you look at 2017 to 2016, we’re down 4%.

And to your point we do expect to see improvement in that, and I think if you - right now if you look at if we - we’re necessarily giving FairPoint or Consolidated information.

FairPoint was basically losing 4% to 5% a year prior to the acquisition and I think because of the seasonality maybe that broadened out a little bit in Q4 but again we would expect with all the fast-start initiatives that we talked about throughout the call and in Q&A we would expect to see that contribute or improve in 2018.

And also on the Consolidated side, we were probably a little bit higher than we would have expected to be going in this year. A lot of it is the price compression that Bob was talking about earlier we feel like - getting closer to be behind us and we also made some changes in our sales leadership.

I think we’re going to be a lot more focused, we’re going to be lot more responsive on CapEx to support fire build for carrier. I guess I would - we can go through it more in detail on a call whatever but we'd start at 4% and kind of baseline with little improvement off of that..

There are no further questions at this time. I'll turn the call back over to Mr. Udell..

Well, thank you and thanks for your interest in our - this quarter and I appreciate you all joining us. We're very excited about the beginning of 2018 and the long-term value we're building for our customers, our employees and our shareholders. Appreciate you all joining us. Have a great day..

This concludes today's conference call. You may now disconnect..