Luke T. Szymczak - Vice President-Investor Relations Daniel J. McCarthy - President & Chief Operating Officer John M. Jureller - Chief Financial Officer & Executive Vice President.

Batya Levi - UBS Securities LLC David W. Barden - Bank of America Merrill Lynch Frank Garreth Louthan - Raymond James & Associates, Inc. Michael I. Rollins - Citigroup Global Markets, Inc. (Broker) David Scott Goldman - Jefferies LLC Kevin Smithen - Macquarie Capital (USA), Inc. Philip A.

Cusick - JPMorgan Securities LLC Simon Flannery - Morgan Stanley & Co. LLC.

Good day, everyone, and welcome to the Frontier Communications first quarter 2015 earnings report conference call. This call is being recorded. At this time, I would like to turn the call over to Mr. Luke Szymczak. Please go ahead, sir..

Thank you, Travis. Welcome to the Frontier Communications first quarter earnings call. My name is Luke Szymczak, Vice President of Investor Relations. With me today are Dan McCarthy, President and CEO; and John Jureller, Executive Vice President and CFO.

The earnings release, earnings presentation and supplemental financials are available in the Investor Relations section of our website, frontier.com. During this call, we will be making certain forward-looking statements. Please review the cautionary language regarding forward-looking statements found in our earnings press release and SEC filings.

On this call, we will also be making GAAP and non-GAAP financial measures, as defined under SEC rules. Reconciliation between GAAP and non-GAAP financial measures is provided in our earnings press release. Please refer to this material during our discussion and review the cautionary language concerning non-GAAP measures in our earnings press release.

I'll now turn this call over to Dan..

Good afternoon and thank you for joining Frontier's first quarter 2015 earnings call. We're very pleased to report on another quarter of solid results in our continuing business, the successful completion of our first full quarter in Connecticut and good progress towards the completion of our transformative Verizon acquisition.

Let's begin on slide five. We added more than 17,100 net new broadband customers in the first quarter. This represents our 9th consecutive quarter of robust broadband growth. Our strong execution in broadband continued to be broadly based across our footprint. We took residential broadband share in 77% of our markets in Q1.

44% of broadband activity in the first quarter was above the basic speed tier of 6 megabits, which represents another quarter of progress from the 40% of activity in Q4, and a dramatic improvement from the mid-teens level of two years ago. This results from our efforts to make higher-speed options available to customers.

That said, roughly three-quarters of our base of residential broadband customers remain at the basic speed tier. So, we still have substantial runway to migrate the majority of our customers to higher-speed tiers and to drive higher revenue. I am also very pleased to report that SME revenue was stable sequentially in Q1, excluding CPE and Connecticut.

This represents our fifth consecutive quarter of stability in SME. We exclude CPE because it tends to be very uneven from quarter to quarter, and we exclude Connecticut revenue because it had a large sequential step up as a result of the Q1 period being the first full quarter of contribution.

Based on our five months of Connecticut experience so far through March, the SME trend in the state has been stable, and we are optimistic about the potential going forward. Looking more broadly at Connecticut, we completed our first full quarter of operations and took actions that we believe will promote our long-term success.

In the quarter, we allowed a significant percentage of the Connecticut bundle customers who were no longer under contract to migrate to our current promotion. This is consistent with our normal practices, but was not the practice in Connecticut previously. As a result, we did experience an impact in Connecticut residential revenue in the quarter.

In addition, when a customer's AT&T promotions were scheduled to expire, we chose to continue the promotional price in order to shield the customer from a price increase.

As of the end of March, we have begun migrating these customers to market pricing, and we expect this to have a positive impact on ARPC and residential revenues in Q2 and future periods. Our goal was to start our relationships with these customers on the right foot, and we believe it was the correct long-term choice for the business.

These actions were concentrated in the months of January and February. Now that we have moved to a more normal customer base management strategy, I am pleased with the trends and the results. For instance, in March, we experienced stabilization across all revenue segments and growth in some key areas.

Based on what we've seen so far, these favorable trends continued in April and we are confident that our execution plan is succeeding. To recap, these actions impacted only Connecticut residential customers and revenue, and were isolated to Q1 in the month of January and February.

Already in March and April, we have moved back to a more normal revenue trajectory, and we feel good about the trend going forward. With respect to Connecticut profitability, the results were strong with expenses lower as we applied the Frontier go-to-market philosophy and cost structures to these operations.

Comparing the current level of OpEx of the Connecticut properties with the same period in 2014 shows we have reduced operating expense levels in excess of $230 million annually. This exceeds our original forecast and we continue to develop additional synergy targets as we continue to operate the acquired system in our Frontier ecosystems.

As a result, the contribution to EBITDA due to Connecticut operations continues to be very strong, despite the residential revenue declines we experienced in the beginning of Q1. Let me now give you an update on the Verizon transaction.

We have made significant progress with our integration planning activities and are on track with the milestones we outlined when we announced the deal in February. We've assembled a very strong integration planning team, consisting of leaders with diverse skills and whose collective experience in this type of integration is truly unparalleled.

We are working on functional gap identification and remediation. Our team remains confident in our ability to complete the conversion and integration in the timeframe we have identified. We have begun the approval process, filing applications with regulatory authorities at the federal and state level.

We are fully engaged with commission staff and various parties in both approval processes. We remain very optimistic that we will be successful on all fronts. We'll provide additional feedback on progress as we meet key milestones and in our ongoing investor calls.

We remain very excited about the benefits of the Verizon transaction for our customers and our shareholders. As we have previously stated, this transaction continues a fundamental transformation of Frontier that really commenced with our 2010 Verizon transaction. Please turn to slide 6.

In 2009, only 30% of our revenue was data and video with voice and regulatory comprising the remaining 70%. After the completion of the current Verizon transaction, this mix will be dramatically improved. We anticipate that data and video will comprise 55% with voice and regulatory now constituting a declining and less significant portion.

And of course, we will also have substantially greater scale. At the same time, we will continue to maintain our industry-leading margins. These high margins result from our intense focus on operational efficiency, the benefits of increased scale, and our ability to transition these properties to the Frontier cost structure.

The combination of these items will allow us to achieve our synergy target of $700 million per year by our third year of ownership. Please turn to slide seven.

For these reasons, we see the Verizon acquisition as a transformative opportunity that will meaningfully enhance Frontier's long-term competitive position, diversify our business, and significantly increase shareholder value.

We estimate that the completion of this transaction will provide 35% accretion to leverage free cash flow per share in the first full year, and will improve our dividend payout ratio by an estimated 13 percentage points. We plan to raise capital to fund the acquisition.

We anticipate raising approximately $3 billion in equity or equity-linked securities followed by an approximately $7.9 billion in debt. We have planned our financing such that the resultant capital structure will maintain our current debt ratings.

We will be opportunistic in completing our equity and debt raises with the goal of completing them in the Q3 to Q4 timeframe, in advance of the estimated first half of 2016 closing of this transaction. As most of you know on April 3, we completed a smooth, well-planned CEO transition. Maggie Wilderotter has become Executive Chairman.

And I'm very honored and pleased to have the opportunity to serve as Frontier's CEO. Having witnessed the growth and transformation of our company over the last 25 years, I believe the company is at its brightest point in my career and our team is excited about the future.

I would like to thank Maggie for her vision, her dedication and her strong support during the last 10.5 years. Finally, turning to slide eight, let me say a few words about my vision for Frontier. First, retaining customers will be at the top of my list of priorities. The first step in growing our business is to retain our existing customers.

We'll move to a more balanced approach to acquisition and retention with a laser focus on retaining our customers. Second, we will grow broadband market share. This will be in both residential and commercial segments. We continue to focus on diversifying distribution channels and utilizing speed, simplicity, and choice to differentiate in our markets.

We'll continue to invest in our networks to enable speed and capacity. In this regard, let me update you on a key development on Connect America Fund II. In the last week we received notification from the FCC that we are eligible to receive $283 million in CAF-II support. This will allow us to invest in underserved as well as unserved areas.

This reflects approximately $133 million of additional funding more than our current support levels. We're reviewing the support on a state-by-state basis and expect to accept the majority of the funds.

Until we complete that review and determine the deployment schedule for 2015 we are maintaining our current guidance for leverage free cash flow and CapEx. We are pleased with this development and it will be an important component of our broadband strategy. Third commercial sales offers us a growth opportunity.

We've spent the last four years enhancing our network, adding partners and distribution channels, and upgrading our information systems. We are now poised to leverage all of these investments and you have already begun to see the results in five quarters of SME revenue stability.

This area remains one of our top opportunities, and we will continue to pursue it relentlessly. And fourth, video in all flavors will be incredibly important to our success. Following the integration of the Verizon assets in 2016 we'll have close to 1.8 million video customers in all categories, more than triple our current number.

This enhanced scale together with exciting advancements in technology will create tremendous new opportunities for Frontier. I will now hand the call over to our CFO, John Jureller..

investing appropriately in our network infrastructure and operations, supporting our current dividend, and utilizing excess cash generated to reduce indebtedness and our leverage ratio over time. We are comfortable with our leverage levels and are committed to maintaining our liquidity along with a prudently managed balance sheet.

Slide 12 contains our debt maturity profile as of the end of the first quarter. Since the close of the first quarter, we have repaid an additional $97 million in maturing debt obligations. Please turn to slide 13. Our guidance for 2015 remains unchanged as follows. Leveraged free cash flow is estimated to be in a range of $785 million to $825 million.

Capital expenditures excluding those related to CAF spending are estimated to be $650 million to $700 million, and cash taxes are estimated to be $175 million to $200 million. This guidance excludes spending related to acquisition and integration expenses. We will update our guidance after our decisions are finalized regarding CAF II.

In summary, Frontier's Q1 2015 operating results. The Connecticut transaction, our prudent capital investments and our expense management, all provide a strong cash flow base and a solid financial platform for supporting and investing in the business.

We have ample capital to invest in and enhance our competitive infrastructure to service our debt and comfortably sustain our dividend. With that, let me pass the call back to the operator and open up the line for questions..

We'll take our first question from Batya Levi with UBS..

Great. Thanks. A couple of questions. First on the adjusted EBITDA that you reported for the quarter, it was down sequentially despite some better progress on synergies and higher revenue contribution from Connecticut.

Can you provide more color on the expenses that you had in the quarter if there were any one-timers or what drove that higher spending? And second question on the churn. It picked up a little bit in the first quarter. You did mention that in Connecticut you went to market pricing in March.

Was that the main cause of the uptick in churn and how do you expect this new pricing in Connecticut to impact subscriber trends both on the video and the broadband side? Thank you..

Hi Batya, it's John. Let me answer the question on adjusted EBITDA and I'll let Dan talk about the market pricing. Adjusted EBITDA, actually our expenses were in our legacy footprint were stable, pretty stable quarter-over-quarter versus Q4, so the revenue – the revenue was really the adjusting factor there.

And then we had, on the free cash flow, we increased substantially our CapEx in the quarter, so our CapEx was up materially versus Q4 and that's really timing. So, the $170 million in CapEx that we spent in the quarter is within the guidance range that we provided..

And Batya on the – on the churn you're right, there was a slight uptick. Two different components really when you look at it, one – really both around the video product set. So, in one case we saw a number of DISH customers leave.

They were really upset with, I think the content disputes between DISH and some of the content players and they opted for another provider who provided a triple play for them. And then the part on own system was really caused when we went through Connecticut conversion we did have some hiccups that we talked about on previous calls.

So, we had a slightly higher churn level in January and February. Feb really did mitigate quite a bit in March and has come down to normal levels in April. We absolutely believe that migrating customers to the right price point in the market, improves the retentive characteristics of that customer relationship.

And we're doing that every single day and we think it's the right decision for the business for the long-term..

Okay.

Just a follow up so, even though you are increasing prices on the Connecticut customers, you're not really seeing much of a difference in the trends in subscribers?.

We've seen an improvement in the trends in March and April, both from a subscriber perspective as well as an ARPC and a revenue perspective.

In fact, some of the tools that we've put in place for our technicians and our call center, our teams allow us to do up sells to other bundles and speeds and packages virtually real time at a customer's premise and we're seeing very good results with those tactics..

Okay. Thank you..

We'll take our next question from David Barden with Bank of America..

Hey, guys, thanks for taking the questions. Two if I could, Dan, I think you've talked a lot about the more normal and encouraging run rates as you exited the quarter into March and now April. I guess, it's been a couple rocky quarters here and it's hard to know what the right normal rate of movement in the business really is at the revenue line.

Could you give us a little bit better color, like are we supposed to be looking at something that looks more like the first part of 2014 for the consolidated business, rather than the last couple of quarters when you say normal is that what you mean? It would be helpful to get some color there.

And then, John, on the reiteration of the free cash flow guide, obviously the cash taxes is coming in way lower, how should we interpret reiterating the free cash flow guide given that your cash tax payments are so much lower than the run rate? Thanks..

Dave, it's Dan. So, first off, you should think about, when I think about Connecticut and the impact it's had on the business, first of all the commercial side of the business in Connecticut has been very stable. We're very pleased with the results that we're experiencing there.

We think there is a lot of opportunity in Connecticut and it just takes a little while to start to tap into that opportunity as you build your sales channels and build the relationships between our sales force and the customers in the market. You really can't accelerate that too quickly; it's really building those relationships over time.

Really a lot of the noise that occurred was around the residential customers. In the residential customers there were a couple of things that we did in the quarter that both allowed customers to move to market based pricing, but we also purposefully held rates on promotions from increasing.

We did not want customers to have a rate increase right in their first bill or second bill with us as the provider and then have to call in during a period of high call volumes. We thought that would be a bad experience for customers.

So we implemented a program of migrating those customers really starting towards the end of March with a very thorough communication plan and giving them insight into what their new bill would be as well as the opportunities if they wanted to change plans moving forward. We've had very good experience with that.

So I don't see a lot more choppiness from migrations moving forward. We've kind of steadied out.

There was a big backlog for lack of better way of describing it since AT&T had stopped doing marketing and really had a different approach to allowing customers to migrate to acquisition type offers and in our case acquisition offers are kind of our everyday pricing in a market.

So there was about four months, five months of backlog that occurred just prior to conversion and then up through January and February, we've worked through that, so I don't think you'll see any more of that and you should start to see a stabilization as we exit Q1 into Q2..

And Phil (sic) [Dave] (29:43) on the – to your question on the cash taxes, our guidance remains intact for now. In the first quarter, it was actually just as we planned. What we saw in the first quarter is, we had a – sorry Dave, and we had a carryover benefit from the extension of bonus depreciation that existed in 2014.

We had already paid our taxes in 2014. So we carried forward the benefit into the first quarter of 2015. So that's why it's seemingly lower than it should be otherwise, but we're still comfortable with our guidance range..

All right.

So we should see the cash tax number kind of pop back up in the coming quarters?.

That's correct..

Got it. Okay. Thanks guys..

All right. Thanks, Dave..

We'll take our next question Frank Louthan with Raymond James..

Great. Thank you.

Can you walk us through the CAF award? When do you expect to start collecting that? And can you give us an idea of sort of the net effect of that sort of the upside or the downside to the numbers, relative to the current subsidy mechanism that you're collecting under – what will – like is it a positive or a negative effect when it's all said and done?.

Sure Frank, this is Dan. I'll take a stab at that the – we were notified of what our CAF award could potentially be. We'll go through – we have now till August 27 to really work through on a state-by-state basis, whether it makes sense to accept those awards and proceed with the obligations.

We do believe that the vast majority of the states we do, we will take those funds and move forward. And we think that will be very helpful for us in improving the experience for customers as well as expanding to unserved areas.

The way the process works is that if we were to decline to take the support as highlighted, then we would be eligible for kind of a step down approach on the frozen support that's currently in place.

In all scenarios that we envision right now, this should be a very positive benefit for us and we would see incremental benefit to the tune of $100 million to $133 million approximately depending upon whether we take all of the support to our current present support level.

And we envision that beginning before the end of the year and we're just hesitant to adjust our guidance at this point till we finalize the states that we're going to accept the funding and look at the CapEx deployment plans that would be part of our plans as we go through the year and we'll have both of those finalized as we get into the probably June, July, August timeframe..

That's very helpful.

Do have a ballpark of what the CapEx would be? Given the throughput that you generally have sort of broadly across your network I would assume you're in a pretty good shape as far as those areas but you have a ballpark of what the capital requirements might be to be able to realize 100% of those offers?.

Well, for 2015 the reality is if we were to elect whatever states we do and we start to receive funding after that point in time the construction season in many of our states really will start to end in October, so there will really only be about two months, maybe three months of CapEx that are associated with it.

There will be some states in the south where we can continue to work into the winter.

So that's why we're trying to understand both the benefit from a revenue perspective, but also what the CapEx plan will be, because it'll be a fairly short window this year, next year I would see the CapEx being significantly higher associated with starting to meet our obligations..

Do you have a ballpark sort of total amount of CapEx you think it might take between the next year or two?.

We don't at this point, Frank..

Okay, great. It's very helpful. Thank you..

We'll take our next question from Michael Rollins with Citi..

Hi. Thanks for taking the questions.

If I can give you two-parter, the first part is what were the synergies recognized after Day 1? I know you have that Day 1 synergy that you guys talked about previously, and then you have the current amount that you've recognized, if you could just give us a sense of the flow? And then I'll be able to ask you another question following that?.

Sure, Mike. When we announced the transaction when we closed, we said we were at an annualized synergy level of $150 million, and then we upped that to $165 million when we announced our full-year results about three months ago.

And so now, as we're getting and running and actually gotten things, everything in place, that's where we're up to the $230 million level..

So it's about $16 million since the Day 1, the updated Day 1?.

I'm sorry; we were at $150 million Day 1, $230 million now. So....

$230 million, I'm sorry, so $80 million is the cumulative amount?.

That's correct, in excess of Day 1..

And really, Mike, as we look forward, we're in the plans, as you can imagine it's a very busy time with us with integration activity for the Verizon transaction but that doesn't mean that our teams in Connecticut and our system teams aren't working on finding additional synergies for the Connecticut operation..

So I guess the question is, as you think then about just the flow through of what's happening with revenue versus EBITDA, are you finding that offsetting some of these synergies you're having to invest whether it's in marketing or customer acquisition or some other kind of expense that might be holding back the flow through of the revenue into EBITDA?.

Well, I would just say from a marketing and subscriber acquisition cost perspective right now, we have spent a little bit extra on our alternate channel simply because during the time that you do an integration, usually the first two months to three months, you wind up with a very high call volume and it can have a impact of really causing your call centers to be less productive.

So we've gone to a little bit more costly acquisition model but that will come back in time as our contact centers become more and more part of our acquisition strategy. So other than that I don't think that we've seen significant upticks in acquisition costs at this point..

Mike, you'll see the flow through to EBITDA as we go through the year, as Dan described, the migration pattern that we had with our pricing which is a normal flow for us and so you'll see that impact on the EBITDA side more prevalent as we move through the year..

Thanks very much..

You're welcome..

We'll take our next question from Scott Goldman with Jefferies LLC..

Hey, thanks for taking the questions. I guess two also on my end.

One, I was just wondering whether you guys would be willing to share or quantify what the impact of migrating to current – to your current promotion was in Connecticut versus where they were before, is there any way to quantify that in dollar terms? Just a quick clarification on that topic as well.

You talked about expanding the AT&T promotional pricing and began moving that to Frontier towards the end of the quarter.

By the end of April, are all those customers going to be off of AT&T promotional pricing and on to your pricing? And then, maybe a last one for Dan, just maybe talk a little bit about what you're seeing in the marketplace in terms of broadband, maybe how things stacked up in legacy versus Connecticut market this quarter and then, what you're seeing from a competitive standpoint?.

Sure. I'll take the last two; John will probably take the first. So on your question on extending the AT&T offers, at the – we started the process on March 25 and as we'll finish all of those cycles at the end of April, all of those customers will have been moved to the correct pricing.

So we should see the benefit of that as we come into our April results. And then on the marketplace discussions, Scott, I would say the legacy markets still seem very attractive to us. We saw some strong results; we took market share in 77% of the markets across the country.

I think if there was anything that slowed down our total broadband additions; it's simply that during the first quarter, we still rely on our contact centers for about 60% in any quarter, of our broadband additions.

And as you go through a large integration, as we did, those high call volumes tend to disrupt our universal queues around the country and as a result, it impacted our gross additions across the country quite frankly, by a few thousand but I would say that in general we still are very bullish on the legacy markets and we look forward to the investments that we're going to make in Connecticut to expand and extend U-verse as well as upgrade the U-verse capability as well as upgrade the more traditional DSL services and all of those costs to do that are in our commitments to the state of Connecticut and in our guidance for this year..

Scott on the revenue side, we don't call out specifically the migration impact. What we can say is that we had customers that were migrating downwards in monthly recurring pricing during January and February.

It actually swung the other way when we went to March and now when we went from March to April, as that pricing actually started to migrate upwards. And we saw new customers coming on toward the end of the quarter in the months at higher price points than where they were in January and February.

So we're seeing a good flow through, as we go into the second quarter. So I'll just say I think we feel pretty good about Q2 in Connecticut..

Great. Thanks, guys..

We'll take our next question from Kevin Smithen with Macquarie..

Thanks.

I wondered if you could talk a little bit about how you evaluate the CAF opportunity given where EBITDA has come in in Q1 and kind of the implied EBITDA guidance for the year? Does that impact at all your propensity to make the CAF investments?.

Kevin, this is Dan. No, I don't think our EBITDA in Q1 would change our criteria. We're really looking at what we believe are the cost and the opportunity that will be unleashed or enabled by the CAF-II in our markets.

There is certain markets where we have close to 100% coverage in a market and taking the CAF funds for that market might not make sense. It might make more sense to stay on frozen support levels for a period of time. But that's just an example – we do a deep dive on the engineering side. Our teams have done a lot of the homework on it.

So, we hope to have clarity on it sooner than August, but we're going to take the time and make the right decisions and it really isn't a function of Q2, Q1 results..

Kevin I will add – there is the long-term benefit too in CAF.

There is obviously the immediate in year benefit of the incremental support levels, but again remember what you're doing is you're either enabling or upgrading more households across your footprint, so that's just more opportunity – broadband opportunity long-term and bundled customer opportunity long-term.

So, we see it as all being good so, it's not – what we – our results for EBITDA are not – don't impact how we look at CAF..

Got it.

And on the Verizon asset, anything in the Q1 numbers that on those assets that you're going to be purchasing that stood out to you positively or negatively?.

I will say – we recently filed an 8-K with a pro forma results for those Verizon properties that was based on 2014 numbers. The revenues came in about as we anticipated and we're still very comfortable with the pro forma EBITDA that we had communicated back in February of about $2.3 billion on an annualized basis for 2014.

You will not exactly see that number in the filing, the difference is the cost take outs that we do against all of the allocated expenses that Verizon embeds in that business, so we still feel very good about our view on these properties..

Thanks..

We'll take our next question from Phil Cusick with JPMorgan..

Hey. Quick follow-up on the CAF stuff.

Any further CAF available in the Verizon territories and I assume that what you've announced already includes the Connecticut?.

There really wasn't CAF available for us, I believe, in Connecticut, Phil. And there potentially could be opportunity, but we won't own the properties obviously at that point. So it's not in the – anything incremental for California or Texas, for instance, are incremental to the $283 million that we discussed..

So you could bid on it next year, but it would not come as part of the Verizon deal?.

We could bid on it or if Verizon were to participate obviously that would be a benefit for us..

I see.

And then, John, we talked in the past about how the cellular backhaul headwind is going to be more front loaded this year, what happened in 1Q and what should we expect for the rest of the year?.

We had continuing decrease as we – as we had anticipated this year. I think in total, we'll see about the same level of annual revenue change in 2015 as we head in 2014.

And again as Dan and team go through this, we see quarterly sequential stabilization in the back half of this year or early 2016 and again a lot of this just depends upon the wireless carriers..

So, 3Q into 4Q or maybe 4Q into 1Q for that stabilization?.

That's right. Remember, this is really kind of in the legacy footprint, those headwinds do not exist in what we had in Connecticut and by the way they will not exist also in the three states from Verizon that we're picking up as well..

Okay.

Last thing on Connecticut, early on there were VoD issues and we heard about some things, customers complaining well into the first quarter, is Connecticut running on the video side exactly how it should be at this point?.

Yes, Connecticut is running exactly how it should be running in the first quarter. There is no additional issues on the VoD library, that was us replenishing the library after conversion and literally customers pulling on it so fast that it would draw down the content as quickly as it was filling, but that is – that's in rearview mirror.

In fact, as we go through, one of the large benefits for Connecticut that will accrue as we do the integration for the Verizon properties, is we'll be upgrading our VoD library substantially in Connecticut, it will be much better experience than really AT&T has anywhere in the country and anyone in Connecticut has experienced in the past..

Great. Thank you..

Travis, we have time for one more question..

We'll take our final question today from Simon Flannery with Morgan Stanley..

Great. Thanks very much. On the integration costs, I think it was $57 million of OpEx in the quarter, is that all Connecticut or are we starting to see some Verizon in there and perhaps a little bit more color about how that trends over the balance of the year.

And then on special access subsidy, that looked a bit stronger this quarter, I was just wondering what was driving that? Thanks..

Sure Simon I'll take those.

On the integration side, we began to see some spending in the Verizon, on the Verizon deal and we really saw the pretty much wrapping up what we're doing in Connecticut, there might be one or two hanging bits that go into Q2 but we're getting close to being done with our Connecticut integration and now just really turning to the ramp up for Verizon.

So you'll see the Verizon efforts really pickup in this year. Right now, we've just said in total about $450 million between OpEx and CapEx in 2015, 2016 for the Verizon transaction, we continue to review and refine that and we will do in the coming quarters. We're deeply into this now with our counterparts at Verizon..

So Q2 should probably pick up a bit from the Q1 level?.

We would have – certainly with respect to the Verizon efforts, yes and I think you're going to begin to see this and as we sort through is the OpEx versus CapEx peace and we'll try to keep on refining and give you more color as we move through the quarters..

Okay. Thank you..

On the special access side is we have sightline, as we said, to finish up CAF Phase I and it looks like that we're – we will have surplus in excess of the definitive amounts we received and that is we were able to really build out and meet our requirements with certain funding left over. So we're just about toward the end.

We have some sightline as to what that leftover would be, so our special access on the regulatory side reflects a little bit of that. So just think about sort of the step up in the quarter was that element, it's not customer revenue, that was just regulatory revenue..

Okay, great. Thank you..

I want to thank you all for joining us this afternoon to review our first quarter results. This is a very busy and exciting time for us at Frontier, as you can tell, as we begin to operate our Connecticut property and prepare for a transformative transaction.

We look forward to talking to you next quarter and updating you on our progress on results and our integration efforts. Thank you..

That concludes today's presentation. Thank you for your participation..