Frontier under more pressure to review its business, possibly sell

Shares in Frontier Communications rose Monday amid a report that Jana Partners is applying more pressure on the telco to conduct a comprehensive strategic review "immediately" that might lead to a sale of the company.

Believing that a review could give Frontier's shares a jolt, Jana Partners told the company's board it should explore a possible sale, strategic partnership or joint venture, or perhaps sell some non-core assets to help accelerate Frontier's fiber upgrade plans, Reuters reported.

"We wish for the Board to pursue whatever option generates the greatest risk-adjusted return for shareholders," Barry Rosenstein and Scott Ostfeld, Jana Partner's two managing partners wrote in a letter sent December 4, according to Reuters. "We believe that a bona fide evaluation of strategic alternatives would lead the Board to conclude that a sale transaction offers the best risk-adjusted outcome for shareholders."

Jana reportedly has spoken to potential strategic and financial buyers, and Frontier has tapped Goldman Sachs to help evaluate its options, Reuters said, citing unnamed people familiar with the matter.

Frontier confirmed it received the letter and that it's open to discussions with shareholders.

"The Board of Directors acknowledged receipt of JANA Partners' letter on December 4, 2023. Frontier engages in open and regular communications with shareholders," a company official said. "The Board is committed to acting in the best interests of shareholders and remains willing to consider any strategic alternatives that may maximize shareholder value."

Related:T-Mobile may be backing a play for Frontier – analysts

Frontier is also set to speak Tuesday at the UBS Global Technology, Media and Telecom Conference.

This latest bout of pressure comes nearly two months after Jana snagged a stake in Frontier with the aid of a "large communications company" that Wells Fargo analysts believe could be T-Mobile.

Frontier shares were up $1.11 (4.97%) to $23.46 each in afternoon trading Monday.

Fiber funding paths

Frontier has been taking multiple paths to help fund a fiber network buildout focused on building fiber to 10 million locations by 2025.

One step along that path includes an offer of about $1.05 billion in debt secured by a portion of the company's fiber assets and related customer contracts in the Dallas area. Frontier is also tapping into about $169 million in vendor financing to help fund its fiber build.

Frontier added about 332,000 new fiber locations in Q3 2023, ending the period with 6.2 million fiber locations. The company also added about 75,000 fiber subscribers, improving on a year-ago gain of 64,000 and extending its total to 1.79 million.

Related:Frontier debt offer narrows telco's fiber funding gap

Some analysts believe Frontier should be a buyer rather than a seller. One target they are speculating about is Lumen, which has looked into whether it needs to hold onto its Mass Markets unit.