Frontier Communications Corporation in 3 Charts

Few companies have made such huge changes to their businesses as Frontier Communications (NASDAQ: FTR) has taken on this year. The $10.5 billion purchase of assets in California, Florida, and Texas early from Verizon (NYSE: VZ) this year well has caused Frontier to just about double in size, and investors have been hopeful that the transition will go smoothly and lead to better growth prospects for Frontier going forward. Yet acquisitions alone won't be enough for Frontier to succeed if it can't deliver on the full potential that its overall business has. Below, we'll look at three charts that demonstrate some of the most important elements of Frontier's business right now.

Image source: Frontier Communications.

1. Moving away from old tech

Frontier Communications spent much of its history serving rural customers in places where technological advances didn't come quickly. As a result, it historically has had a high proportion of customers receiving traditional landline telephone service. Even as recently as 2009, a third of the company's revenue came from residential voice, as the chart below shows.

Image source: Frontier Communications.

Recently, however, Frontier has made great strides toward increasing its proportion of revenue from more profitable opportunities. Residential data has more than doubled its share of Frontier's total sales in the past seven years, and video has emerged as a key part of the company's revenue mix as well, eclipsing landline revenue in the second quarter of 2016. Moreover, business-related sales have maintained their share of a growing pie, and Frontier plans to make business an even more important part of its overall mix. Although it still has work to do, Frontier has done well in pushing customers toward the opportunities it wants to pursue.

2. Dealing with acquisition-based disruptions

Frontier has received criticism from investors for the way that it has handled its most recent Verizon acquisition thus far. Hiccups in moving customers from Verizon to Frontier resulted in service outages, billing issues, and other inconveniences that prompted thousands of customer complaints to regulatory agencies overseeing the telecom industry. Investors feared that customer counts could suffer as a result, and at first glance, net declines in the markets that were part of the acquisition seemed to confirm those fears.

Image source: Frontier Communications.

Yet as Frontier pointed out, most of the negative impact to net additions during the second quarter came from the failure of the company to bring in new customers, rather than from big increase in disconnections among existing customers. The slight rise in disconnect activity did have a downward effect on net additions, but Frontier blamed most of the drop on the suspension of marketing activities in the immediate aftermath of the transition. Now that marketing is back, investors can expect third-quarter results to be better and more indicative of what Frontier sees in the future.

3. Sustaining its dividend

One of the most controversial aspects of Frontier is its dividend. Many investors look at Frontier's earnings and see the payout as unsustainable, but the telecom instead uses its adjusted free cash flow metric as its way of measuring whether it is paying out an appropriate amount to shareholders.

Image source: Frontier Communications.

If anything, Frontier appears to have gotten healthier in terms of offering dividend sustainability. Free cash flow has risen by more than 20%, roughly tripling the 7% growth rate in the amount of cash dividends that Frontier has paid to shareholders. The numbers in the chart reflect further adjustments to exclude certain aspects of the Verizon acquisition, but they nevertheless show Frontier's attitude that it sees few threats to dividends going forward.

Frontier has undertaken some big changes lately, and it's working hard to make the most of the opportunities that it has opened. These three charts show that Frontier is confident about its future prospects, even though it still faces challenges in making its aspirations a reality.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.