Other fiber builders exploring Frontier's fresh funding path

Frontier Communications' move to bridge a funding gap by securitizing fiber assets in the Dallas (TX) area to the tune of $2.1 billion of additional committed capital could prompt other fiber network builders to do the same, reckons an industry analyst. Frontier's stock popped in the wake of the transaction, which centers on about 600,000 fiber locations in the Dallas area. Alongside debt and other financing, Frontier has about $4 billion of liquidity – considered enough for the telecom to polish off its plan to build fiber out to 10 million locations inside its own footprint by 2025. Other fiber network builders are sure to be taking notice, MoffettNathanson analyst Nick Del Deo surmised in a new report (registration required) that explores the implications of Frontier's transaction. "We suspect we'll see more fiber operators move in this direction for financing," Del Deo explained, noting that Frontier's move "should just about take funding risk off the table for the foreseeable future. A key bearish argument [pertaining to Frontier's plan] has thus been largely resolved." Del Deo said his discussions with others in the industry lead him to believe that the level of interest in fiber securitizations "has risen substantially over the past year." He continued: "With the model now having been fairly well established for FTTH [fiber-to-the-home] operators and with borrowing rates up sharply in general, it wouldn't surprise us to see other high yield issuers, both public and private, with mature fiber clusters turn to this option to help manage their funding costs and pursue their builds."