Daniel J. McCarthy - Chief Operating Officer and Executive Vice President Mary Agnes Wilderotter - Chairman, Chief Executive Officer and President Donald R. Shassian - Chief Financial Officer and Executive Vice President Gregory Lundberg -

Michael McCormack - Nomura Securities Co. Ltd., Research Division Philip Cusick - JP Morgan Chase & Co, Research Division Scott Goldman - Goldman Sachs Group Inc., Research Division David W. Barden - BofA Merrill Lynch, Research Division Simon Flannery - Morgan Stanley, Research Division Frank G. Louthan - Raymond James & Associates, Inc., Research Division Batya Levi - UBS Investment Bank, Research Division

Good day, everyone, and welcome to the Frontier Communications Third Quarter 2011 Results Conference Call. This call is being recorded. At this time, I would like to turn the conference over to Mr. Greg Lundberg. Please go ahead.

Thank you, Jennifer. Good morning, everyone. The purpose of this call is to discuss the 2011 third quarter results for Frontier Communications. The press release, earnings presentation and supplemental financials are available in the Investor Relations section of our website, frontier.com. On today's call are Maggie Wilderotter, Chairman and Chief Executive Officer; and Donald Shassian, Chief Financial Officer. Also joining the call, are Dan McCarthy, Chief Operating Officer; and Kathleen Abernathy, Chief Legal Officer. During this call, we'll be making certain forward-looking statements. Please review the Safe Harbor language found in our press release and SEC filings. On this call, we'll also be discussing GAAP and non-GAAP financial measures as defined under SEC rules. Reconciliation between GAAP and non-GAAP is provided in our earnings release. Please refer to this material during our discussion. I'll now turn the call over to Maggie.

Thanks, Greg, and good morning, everyone. Thank you for joining us today as we discuss the third quarter 2011 results for Frontier Communications Corporation. For today's earnings call, I ask that you follow along with the supplemental slides available on the Investor Relations page of our website at www.frontier.com. I'll begin with a summary of the quarter, followed by a review of the business performance and key metrics, and then conclude with our initial thoughts on the FCC order that was issued October 27, before handing the call over to Don Shassian. Please see Slide 4, where highlights of the quarter are provided for your reference. After months of preparation, I'm pleased to report that we have successfully completed the conversion of 4 more states to our legacy system. The conversion began in the early morning of October 1. We established command centers covering all functional areas of the company. The code ported over correctly to legacy Frontier systems, and over the subsequent several days, we completed the migration of numerous critical system applications. We are successfully handling orders, troubles and dispatch of technicians. And as of today, 22 of our 30 October monthly billing cycles are complete. We will have caught up on all billing cycles and will be back on our normal billing schedule by mid-November. The conversion of these 4 states is complete and is a success. The hard work and preparation by our employees made this our best conversion to date. Our conversion game plan, which dates back to our conversion of Commonwealth of Pennsylvania becomes better and better each time we tackle a new and significantly larger project. This successful conversion of over 1 million customers has given us the blueprint for converting the final 9 states. This was a major hurdle, and we cleared it with no major issues as we told you we would do so. System conversions significantly enhanced our ability to manage the business and further reduce costs. We now expect to convert the remaining 9 states by the end of the second quarter of 2012. Our broadband expansion reached an additional 126,000 new homes in the acquired properties during the quarter, bringing our year-to-date total to 352,000 which is on track to reach our 2011 goal of increasing broadband availability to more than 400,000 additional homes. Broadband availability in the acquired properties is now 80%, a significant increase from the mid-60% range when we acquired them. As a result of our expansion and sales efforts, we had a very strong quarter for broadband growth, adding 16,900 total DSL subscribers, a 38% sequential increase from Q2. We also added 2,300 wireless data customers. This growth reflected the effectiveness of our local engagement model, as well as organic demand for broadband in both legacy and acquired properties. We have also largely completed our efforts to migrate middle mile congestion, which now gives us the ability to more effectively market higher speeds in markets that were already enabled. We generated $18 million of incremental cost synergies in Q3. Our total is now $496 million, putting us 83% of the way toward our $600 million 2012 goal. The largest contributor to the synergies in Q3 was the full impact of traffic migration to our own national backbone. We will realize additional synergies as we convert the remaining acquired property systems onto Frontier's legacy system. In Q3, our cumulative synergies helped Frontier generate a 47% EBITDA margin. Turning to Slide 5, you can see a financial and operational snapshot of the past 4 quarters for the company. We continue to show sequential improvement in access line loss rates and residential customer loss rates. As I mentioned earlier, high-speed Internet growth showed strong sequential improvement. However, we are not satisfied with the sequential performance of our customer revenues. All of our employees remain very focused on the top line and know that changing the slope of that line is critical to the company's long-term success. We have done a great job reducing operating expenses as you can see in our 47% margin, but we need to generate additional revenue to sustain improvement in margins and free cash flow. I wanted to share with you the success we have experienced in West Virginia. As you know, we converted West Virginia to our legacy operating systems on July 1, 2010, when we closed the Verizon acquisition. This has enabled us to be nimble in the marketplace in driving market share of Frontier products, and in delivering improved revenues and metrics throughout the state. We believe West Virginia is the proof point of what is possible to deliver to all of the acquired property markets after conversion. Dan McCarthy, our Chief Operating Officer, will now give you a summary of the key business improvements we have achieved in the past year in West Virginia. Daniel J. McCarthy: Thanks, Maggie. Broadband availability in West Virginia was 78% at the end of September, up from 62% at closing. Our capital spending to improve the network and expand broadband in the last mile and middle mile, plus the ability to sell with local engagement on our own systems has driven a strong turnaround in the state. The 9-month period ending September 30, 2011, compared to the 9-month period ending September 30, 2010, we've seen residential customer losses decrease by 25%, with churn falling 60 basis points. High-speed net additions turned from a net loss of 1,600 to a net gain of 6,800. Video net additions increased from 5,200 to 15,342 and commercial competitive win-backs of 1,000 customers. Frontier's high-speed penetration of newly available homes was 18% at the end of Q3 2011, which is 4 points higher than we reported to you last quarter. We expect increasing broadband penetration to continue, improving customer metrics as we sold double and triple play bundles. Improvements in customer service and network quality are also impacting this positive customer growth. Some service metrics for Q3 2011 compared to Q3 2010 include: Service activations within 72 hours improved 34%, commitments met improved 29%, service outages repaired within 48 hours improved 13%. Overall, our local employees and our network are serving residential and business customers in a much more robust way than a year ago. Press coverage has been positive about Frontier and our investments and our service. Complaints have also dropped to our call centers and the PSC. I also wanted to mention that our investment in the middle mile of West Virginia has increased broadband capacity more than 100-fold. Our Fiber 7.0 installation of 12 integrated fiber rings throughout the state provides broadband capacity to serve virtually every school, hospital, library and business. We don't believe this integrated network capability is available anywhere else in the United States from a state-wide perspective. This state-wide fiber optic network, combined with our broadband deployment, will take West Virginia from one of the least connected states in the nation to one of the most connected. This capability has a huge opportunity for economic development and job creation. I look forward to reporting other state metrics to you as we replicate the West Virginia experience across the remaining 13 acquired states.

Thanks, Dan. Now let me turn to Slide 6 to walk you through a business update, and what we're doing to address revenue growth overall. Commercial business continues to build a solid pipeline of sales opportunities that we expect to positively impact our revenue in Q4. We are gaining traction across all markets, driven by local engagement and a broad product portfolio including voice systems, customer premise equipment, wireless data systems, web hosting, e911 systems, power backhaul, and high-capacity bandwidth. During Q3, we expanded Metro Ethernet availability to 55 markets in 10 states, and expect it to be available to 70% of our footprint by the first quarter of 2012. In residential, we hosted 1,325 local engagement events in Q3. We believe that this level of customer interaction is driving our improved metrics. We will continue to increase network capacity to deliver higher broadband speeds. Further, we have launched new residential products including Frontier Second Connect, which is a $14.99 second broadband connection that doubles capacity in the home for half the price. We are taking the second line that already exists in all of our homes and we're utilizing it for double broadband capacity. This permits home businesses to operate at our peak network speeds and also allows children to watch video, do homework and play online video games on their own connection. This product was launched in late August and we're seeing encouraging initial results, including 75% of additions from existing customers and 25% of additions coming from customers that are new to Frontier. This quarter, we have launched a 2-state home security service trial to strengthen our residential customer bundles. We are evaluating service providers by partnering with both ADT and Protection 1. Continued success of our custom value pricing program, which is working well as a result of its simple and powerful message, customers should only select the services they need, and they save up to 15% when they bundle. In addition, I'm very pleased to announce that we have entered into an agency agreement with AT&T Mobility to sell AT&T wireless voice and data services in bundles with our existing products. This agreement will include both brands in an arrangement that will enable Frontier to offer the hottest mobility devices on the AT&T wireless network combined with our broadband, WiFi and video products. We plan to trial this new service offering in the first half of 2012. Once we iron out all the operational processes, we will roll this service to other markets, and eventually, nationwide. This type of arrangement is very consistent with our goal of being a one-stop shop for all communication services needs of both our business customers and residential customers. Like our DISH agreement, we are partial to relationships with leaders, and AT&T mobility is a great provider for Frontier in the wireless space. We plan to use wireless as a bundled service offering only. Customer service is helping drive better residential metrics through improved messaging and customer awareness. Our 2-hour appointment window has been achieved 97% of the time across the entire company. Customers appreciate this time-saving benefit. Approximately 70% of our techs in the acquired properties do full installs during these appointments, which ensures that our services are installed and introduced correctly, and that the customer is happy and understands how to access broadband if they are new to the category. Over the next several months, we will bring full installs up to the 95% level in our new markets, which would match our legacy market percentage for full installs. Turning to Slide 7, you can see where we stand on several of our key metrics. The first chart shows that we doubled our broadband net additions from Q2 to Q3, and this includes lower FiOS losses and 38% more DSL additions. Breaking this down, legacy high-speed net additions were up 15% sequentially, and acquired markets were up 46% sequentially. This is even more notable when you consider that we did not run any significant incentive campaign during the quarter. The second chart shows that Q3 broadband strength was not dependent on the satellite TV component of the bundle. Satellite net additions were 12,000 lower than in Q2 when we were running promotions. We are still pleased with this level of video growth, which is ahead of plan for the year, and expect to continue increased satellite TV penetration in the acquired properties to drive their 13% video penetration towards the legacy level of 19%. In the third chart, total access line losses improved by 10 basis points to an 8.5% year-over-year decline, our lowest level since taking ownership of the acquired properties. We also improved the acquired properties to a loss rate of 9.8%, which is first time that, that loss rate has been in single digits. We expect that our revenue initiatives and local engagement will continue to improve these metrics. The last chart shows that our churn remained low, but did tick up slightly in both legacy and acquired. We anticipated this, as our Q3 is traditionally a seasonal time when summer residents leave vacation homes in many of our markets, and will restore services the summer season next year. Let me now turn to the Federal Communications Commission order that was issued on October 27, 2011. My comments are made in the context that the FCC has not yet released the 500-plus page order. With that said, we believe the order is a reasoned transition that provides protection to carriers like Frontier as we move toward increasing broadband availability for rural America. It preserves many of the key aspects of the plan submitted by Frontier and other telecommunications carriers earlier this year. The primary objectives were to bring simplicity and fairness to interconnection, and to support the goal of extending broadband to more Americans. Broadly, we believe that these goals were met. For Frontier, we expect to see additional infusion of USF support in 2012 and 2013 for broadband deployment. Voice and phantom traffic reform that ensures that there are no free riders on our network, which equates to some additional revenue. The ability to offset lower access revenues to increase subscriber line charges. It is still too early to quantify all of the financial impacts of the order. We believe, however, that the combination of interconnection rate step-downs, offset by increased subscriber line charges and other transition support mechanisms, will not have a significant impact on overall revenue streams. In addition, these regulatory changes provide regulatory stability, as we help the government in its goal of expanding broadband to rural America. Government subsidies for the capital investments in 2012 for broadband to unserved and underserved areas should help us accelerate some of our broadband bill. So in summary, our Q3 results showed solid product metrics that we expect to convert into stronger revenues over the next few quarters. Our free cash flow improved sequentially, and we expect capital expenditures to decrease in Q4 as we reach our targeted 2011 expansion and complete other capital activities. As we wind down our broadband expansion in 2013, we expect improvements in our dividend payout ratio, which was still a respectable 71% in Q3. Frontier's Board of Directors declared a fourth quarter dividend equal to $0.75 per annum at our November 2 board meeting. With that, I'll pass the call over to Don Shassian, Frontier's Chief Financial Officer. Donald R. Shassian: Thank you, Maggie, and thanks to all of you for joining our call today. Before we go into the key drivers of the quarter, I would like to highlight 2 items. First, we incurred nonrecurring items, which negatively impacted our Q3 earnings, including $67.4 million of integration costs and $3.6 million of severance costs. These were offset by a $14 million reversal of tax reserves. Adjusting for the after-tax impact of these items, our Q3 earnings per share would move from the reported $0.02 per share to $0.05 per share. And secondly, we are now disclosing wireless data or WiFi subscribers, as part of our total high-speed Internet subscribers. This business continues to gain strength and is an integral part of our product suite when selling broadband to commercial customers. A restated breakout of broadband customer count between DSL, wireless data WiFi and FiOS is available in the supplemental schedules on our website. For the next several slides, I will present our Q3 results in the context of the 4 key strategic tenets we use to drive the business. One is an outlook engagement; 2, acquiring and retaining customers; 3, getting expenses out; and 4, building and improving the network. Slide 8 shows our revenue composition. Frontier continues to have one of the smallest exposures to regulatory revenue at just 5.8% for inter-carrier compensation and 3.8% for universal service. The $10 million sequential decline in regulatory revenue in Q3 was also our largest since closing, given by declining switch minutes of use and the settlement of several carrier disputes. When we exclude this regulatory revenue, the resulting customer revenue of $1.1 billion is 51% business and 49% residential. With 64% of those customer revenues coming from business and broadband. We remain focused on growing this percentage as our commercial pipeline is quite robust. Slide 9 looks at our revenue trends during the quarter. Maggie reviewed the improving metrics from implementing local engagement and focusing the entire organization on acquiring routine customers. Given this continued customer focus, along with our recent conversion, which streamlines our internal operations and has 3 of our 6 regions in the same platform, we expect these leading indicators to be followed by improving revenues. There are several examples of underlying trends in the quarter that demonstrates solid improvements. On the residential side, first, did a very substantial improvement in the absolute number of residential customers retained. Second, we continue to see very good penetration in the newly-built broadband communities with average penetration to-date of 13%. We expect broadband traction in these new properties to increase, thereby bringing in double and triple play customers at higher average monthly revenue over the next several quarters. Third, our first half promotions of free satellite TV for the rest of 2011, and the 6 months free high-speed negatively impacted, as expected, our residential revenues for the quarter by approximately $5.6 million. The credits from these promotions will expire in the fourth quarter and the first quarter of next year. On the commercial side, customer losses in the third quarter were relatively consistent with the second quarter, with average revenue per customer in our legacy and acquired properties continuing to improve, driven by positive growth and higher residential wholesale, enterprise and medium customers, and a decline in lower revenue small business customers. Despite all of that good momentum, our third quarter commercial revenues were down sequentially $6 million, primarily due to pricing adjustments in credits given to customers for settlements of disputes. As Maggie mentioned, our view of the fourth quarter gives us confidence that the increasing commercial pipeline will deliver growth in the fourth quarter. The pipeline of customer interest is in all products, the Metro E and dedicated Internet, the CPE. Turning to Slide 10, you can see that we have consistently reduced the total level of cash operating expenses, which is one of our key strategies despite seasonally higher storm damage. As you can see in Slide 11, we achieved an incremental $18 million of synergies in Q3, bringing our annualized total to $496 million. I'd like to note that this $496 million synergy run rate as of Q3, is 99% of the original $500 million synergy goal we set at the end of 2012, and gives us a very high degree of confidence that we will be able to deliver our $600 million synergy goal by the middle of 2012. Q3 synergies were driven by additional reductions in backbone expense from a cut over that began in Q2. We also recognized Q3 synergies from the elimination of certain real estate leases, elimination of contractors, some changes to wages and benefits, and reduced non-wage information technology costs. In Q3, the pace of our total expense reduction was offset by some nonrecurring and seasonal costs. The severe storms in the East Coast and some heavy rains in the Midwest and central regions negatively impacted our expenses by approximately $12 million in Q3. Specifically, the East Coast hurricane and tropical storms at the end of the summer impacted the outside plane of central offices in several markets, and resulted in increased overtime and contractor costs to repair and maintain the network from these summer storms. As Maggie mentioned, we have very successful conversion of the 4 states onto our legacy operations platform. The remaining 9 states are still operating on the Verizon applications. We are currently determining our exact path forward for conversion in the first half of 2012. This latest conversion has given us confidence that it can be done before July 1, but our plans are fluid right now and will be communicated when finalized. The other side note of significance to this latest conversion is that in addition to all of the applications being converted for the 4 additional states, we also converted the remaining 9 states to our financial systems applications. Therefore, all of Frontier operations are now on one legacy financial human resources platform. This gives us a significant opportunity to leverage our scale, as well as a better line of sight on project spending, improves our internal operational reporting and gives us the ability to drive P&L performance and budgets down to each local area manager in the acquired properties in 2012. Slide 12 focuses on the last key operating strategy, building and improving the network. We connected broadband to 126,000 new homes in Q3, and also completed most of our congestion relief in the middle mile of the network. We expect capital expenditures to drop meaningfully in Q4, as we complete our buildout projects for the year. When the buildout is complete in 2013, we expect to see capital expenditures drop to recurring level of approximately 11% of revenues. This decline in capital intensity will positively impact our free cash flow, which is highlighted on Slide 13. We also expect lower costs and better revenue performance to expand our EBITDA margin past the 47% level in Q3. Our dividend payout ratio, excluding one-time integration CapEx and operating expenses is 71% in Q3 and at 75%, year-to-date. With no changes in Washington as yet, corporations will still receive 50% bonus depreciation in 2012, followed by 0 bonus depreciation in 2013. We will provide full 2012 guidance on our next earnings call, but our preliminary view is that, assuming only 50% of bonus depreciation in 2012, our cash taxes in 2012 should be approximately $150 million. Slide 14 shows a strong $1.1 billion of cash and borrowing capacity as of Q3, which is incremental to our annual generation of positive visible free cash flow. Leverage at September 30 was 3.17x. Subsequent to the end of the quarter, we raised $575 million of senior unsecured bank debt, and used the proceeds to repay 3 loans, totaling $473 million. We now have no significant maturities scheduled until 2013. Pricing on this new debt is LIBOR plus 2 7/8, which is very attractive relative to our primarily fixed rate indebtedness structure. We continue to watch the credit markets very closely and will address our 2013 maturities when conditions are right. We remain committed to a net leverage ratio of 2.5x, and see this as our primary use of excess residual cash in 2012 and beyond. Lastly, please note that we contributed $58 million of real estate to our pension plan during Q3, and expect no further cash contributions to the pension plan until mid-2012. Our annual 2011 guidance, as shown on Slide 15, is unchanged. In summary, were continuing to show very good strength on many fronts. Our conversion was successful, and we're eager to complete our financial integration in the first half of 2012. This is our strongest quarter of broadband growth. We delivered solid customer metrics. Our commercial pipeline is robust with new products coming to market. Our synergies are on track and ahead of schedule, and we raised sizable capital at attractive rates. As Maggie mentioned, we are extremely focused on the revenue line and know that this is the critical driver of our future success. A combination of improving operating metrics, able and growing revenue per customer, simplified operational systems and processes and continued local engagement of the customer will allow us to deliver on this commitment. With that, let me pass the call back to Jennifer to open up the call to questions.

[Operator Instructions] We'll take our first question from Batya Levi with UBS. Batya Levi - UBS Investment Bank, Research Division: I'd like to go back to your comments on revenue trends. It looks like residential revenue declines worsened than the legacy properties, and we haven't seen much of an improvement in the acquired properties despite better metrics you had. And business revenue decline is sort of non-improving as well. Can you talk about -- a bit more detail and what gives you the confidence that top line will start to turn from here on? Donald R. Shassian: Batya, we continue to see very good underlying operating metrics. Without doing a lot of aggressive promotions, the customer losses, the residential customer losses and absolute numbers are declining quarter-to-quarter on the residential side. Commercial, we're seeing some stabilization on the customer losses as well, and continue to see a very robust interest in our products in the newly-built areas on our broadband expansion. We're seeing some very, very good penetration and so we now continue to really push into those markets on the residential side. I think we're going to see a change in direction on trends. On the commercial side, which we've been talking about for a number of quarters now, we've been building a very exciting and very competent and energetic sales force, and we have a very good pipeline of commercial opportunities which we think will be coming in Q4. Everything is sort of coming together into this -- the next couple of quarters, and all those underlying metrics are very, very strong. We do need to chart in the revenues, we need to clean up some of the settlement disputes we've had in the past, but the underlying metrics are really there in West Virginia. It really is a very good barometer of what we've really seen in terms of the change.

Yes, Batya, I would add that if you look at the commercial side, the revenue decline in commercial was really one-time items. And it was clean-up of settlements and disputes that have been out there for a very long time. So we wanted to put all that behind us. That's a one-time issue. The other thing, on the residential side, in addition to what Don said on the improving metrics, the improving numbers on broadband, the better churn numbers we're seeing, is the promos that we did in the first part of the year really affected Q2 and Q3 from a revenue perspective. Those are done. And in Q4, we're starting to get paid for those products and services, and that will continue into Q1 based upon when the customer comes off that promo. So we will also see millions of dollars of revenue left from the promo side of the business as well. So I think we are very encouraged for Q4 and into Q1 to start to see the revenue turn, both on the business side and the residential side. Batya Levi - UBS Investment Bank, Research Division: If I could follow up on the promotional activity, do you expect to institute another plan towards the end of the quarter now that the 4 states have converted? And if you could talk a bit about the trends you've seen in October, the strengthened broadband? Did that continue or did you see some pickup in the competitive activity?

So we do have some good promotions, solid promotions, that are starting this month in November in all of our markets. I think, as you know, we sort of took a bit of a hiatus in October so we could keep our heads down and get through the conversions, which we have done. So we do feel very good that we'll have a continued strong activity, especially for double and triple plays in the fourth quarter. Most of that activity, from a list perspective, will be this month and next month. October, the trends were solid. We knew we would have some fall-offs in the Midwest region and the Southeast region due to the conversions. We've been monitoring that. The fall-off is exactly what we thought it would be. We still have net adds coming on in those markets. But for several weeks, we were dealing with backlogs and cleanups and not doing a lot to cause phone calls into our call centers for promotional activity. The other regions are very solid. So October looks good. We have not seen competitive activity hurt us in the month of October. So we are still counting on a solid quarter from a growth perspective for high-speed and product. Donald R. Shassian: And if I may also add, on the commercial pipeline, just to give you some perspective, Batya, jumping to medium and enterprise, when we look at the pipeline of opportunities that we're pursuing, looking at June versus the end of September, 452 opportunities on just one product of Metro E dedicated Internet, that would equate to about $1 million of monthly recurring revenue up to about 1,700 opportunities equating to over $3 million to $4 million of monthly recurring revenue. Now that's one example of a pipeline that has significantly increased just for one set of products for a group of customers, and we've seen that across the board in single haul [ph] and small or seeing it in CPE, both nonrecurring and recurring revenue pipelines that have significantly grown over the past couple of quarters, and we're starting to bring some of those home.

Yes. And as I mentioned in my script, we did turn Metro E on in 55 locations. So that was a big milestone for us in Q3 that gives our commercial sales team the opportunity to start bringing those customers that have been in the pipeline and waiting for that capability and get those sites installed in the fourth quarter.

We'll go next to Phil Cusick with JPMorgan. Philip Cusick - JP Morgan Chase & Co, Research Division: Can I first clarify on Batya's question? You said that one-time items were a good part of the commercial decline on this quarter. So how much was that? And is that a sort of natural rebound in commercial revenue from 3Q to 4Q? Donald R. Shassian: It's about $4.5 million to $5 million, I would call settlement disputes and a contractual dispute that have been carried over. And that portion, I would definitely not expect to see carryover.

So that's out of the $6 million delta. So... Philip Cusick - JP Morgan Chase & Co, Research Division: Right. So we should see that just rebound and then whatever additional growth you get on top of that? Donald R. Shassian: Yes, sir.

Yes. Philip Cusick - JP Morgan Chase & Co, Research Division: Okay, okay. And then can you help us think about the cost side in the fourth quarter, additional promotions. How do those offset lower costs from synergies and things like the billing conversion? Donald R. Shassian: The promotions -- so if you're thinking about the promotions being aspirational gifts like we've done in the past, we're not looking at aspirational gifts in Q4. So what we're doing is slightly increased marketing, and really providing other types of incentives for customers for periods of time. I don't see that as being a very big offset to our cost savings.

Yes, we consider an aspirational gift a double or triple play in the fourth quarter. So we're not doing any hardware that would drive expense to the P&L for that quarter. And we've had marketing dollars reserved for the fourth quarter, so we don't see a bubble in marketing. We'll spend more than we did in the third quarter, but that's by design. Philip Cusick - JP Morgan Chase & Co, Research Division: Okay. Last thing, you added this WiFi broadband customer in there, can you talk about how you count them? Is that in sort of active monthly customer or just someone who used it? And what's the ARPU on that? Donald R. Shassian: Phil, that is an active contractual customer. Example, you're selling to a university or colleges and they say buy x number of seats, whether it's 100, 200 or 300, and they're paying approximately $10 a month for WiFi. We've obviously been in this business for a while, it continues to be very steady growth internally, even counting them. And just so you know, we go to businesses or we go to certain locations, if they want a wireless solution versus a wireline solution, our goal is to be able to retain that customer and give them what they want. So giving them broadband, what customers there needs, so why don't we just put it in the mix and counting it? It's been in our revenue, we've never had the minutes [ph] in there. We did restate the numbers so you can see the changes going back a number of quarters. You can see the opportunity just continues to grow. Does that help?

We'll go next to Scott Goldman with Goldman Sachs. Scott Goldman - Goldman Sachs Group Inc., Research Division: I wanted to first talk about broadband and the really good net add number you had this quarter. I wonder if you could maybe help break it down for us a little bit and kind of talk a little about how much may be coming from some of the new homes that you've built throughout the year to increase your availability. You highlighted the Second Connect. If there's any way to sort of quantify how many of the adds really came from the Second Connect? And what you're seeing from these new homes on an ARPU basis?

Scott, we don't have the full breakdown by every facet in front of us. Second Connect, as I said, this is the first quarter that we've launched it. We've done several thousand Second Connect adds. So we feel good about that. We think that as we're selling new customers, as I mentioned, 25% are coming from new customer sales. So they're taking the original Connect and the Second Connect simultaneously, which is definitely a good news story for us. We're also driving the penetration in the new markets, especially in the new build areas, as we mentioned. Penetration is up to 13% in those areas. So in West Virginia, as Dan mentioned, it's at 18%. So we're continuing to focus on trying to get as much penetration as possible into the new areas for broadband as well. And I'll tell you, legacy has held its own. So we did decent net adds in our markets across our footprint and we've seen that momentum continue to build. So we feel good about not just the numbers for the quarter, but as building on that momentum into this quarter. Scott Goldman - Goldman Sachs Group Inc., Research Division: And then if I could just maybe follow up with a question on customer churn. If you look at the residential customer churn, looks like it kicked up a little bit for both legacy and in the acquired properties. I think Maggie, you may have made a comment about some seasonality in there. But just wondering, if you can comment a little bit more broadly on what you're seeing from a customer churn basis? And what do you think it's really going to take to show improvements such that the acquired properties can help narrow that gap to where you guys are on the legacy Frontier side? Donald R. Shassian: Let me first start the -- there's a little bit of a tick up. It really is in certain seasonal areas. I see it's pretty minor. Local engagement campaigns and activities, they're all grown fully and put in place, so it's very, very low in legacy and we're seeing a continuing improvement in the acquired properties. The churn in acquired properties was well in the lift of 2% on the residential side, it's now at 1.88%. Dan made comments earlier about West Virginia, and West Virginia is 20 basis points below that. It's really made some very significant improvement. I think it's really just continuing to push through on 1,000 points on the local engagement. Our customer service continues through the process, continue to improve the product and quality and experience. And it shows -- I think we're making some really good progress and there's the slight tickup for the quarter. I just think it's an aberration of seasonal -- I expect this to continue to drop.

Yes, we've analyzed churn, Scott, if you look at our seasonality, we have a number of vacation locations [ph] throughout our market. So when we saw the uptick, we looked at where that uptick is coming from. It really is coming from the seasonal areas, which is typical for us for this quarter. And I agree with Don. I think we're continuing to drive improvement. And one of the big drivers of reduced churn is making sure we have the right product set for our customers. And as we've continued to churn on more broadband, it gives us that double and triple play opportunity that we didn't have before, which is really why we've seen churn decline in the acquired markets now to single digits. So we're continuing to focus there. I think we have a lot of strength going into this quarter in terms of the promotions and the sell-through. And we are keeping our eye on it. There's no doubt about it. Our goal is still to get the acquired properties driven down to the legacy level. Donald R. Shassian: And Scott, if I may, let me just give you some numbers just for context. Our third quarter churn resi legacy, 1.42%. Up a little bit, but still very, very good. Our acquired properties overall are 1.88% West Virginia which is on our one -- sits in their platform, it's got a lot of things obviously going, is at 1.69%. The acquired properties on that one is already driving a lot closer to legacy, and we think that as we continue to implement what we've been doing in West Virginia, in all the other states over the next number of months, we'd be able to continue to drive that 1.88% overall down closer to legacy.

And I think as Don mentioned, too, was the financial conversion we did in October. We also now have great metrics and daily reporting that our local managers in the acquired properties have on customer churn, on customer sales, so it gives them better tools also to manage the business from a local engagement perspective.

We'll go next to Simon Flannery with Morgan Stanley. Simon Flannery - Morgan Stanley, Research Division: Wanted to -- if you could talk about -- continue to talk about churn on the FiOS side. Where are we in terms of going through the impacts of the rate changes in the activation piece and so forth? Do you think that's going to start to diminish over the next couple of quarters here? And then Don, in the past you've given a nice overview on the macro trends sort of region by region, perhaps you could give us some more color there?

I'll start on the FiOS piece. Dan, you can jump in on that, too. I think that we had a very good news story in Q3, so we've really started to see the stabilization of FiOS churn throughout our markets, which was important to us to see. We are really having normal churn rates on FiOS now. That's to the levels that they were at before we did the price increases. When we did the price increase on installation, what we've seen is the top line is not growing like it was before. So we've really stopped the top line growth at FiOS... Donald R. Shassian: The gross adds.

On the gross adds. So the churn numbers, the net numbers are really from a lower gross add number, but the churn numbers have come down as well to a net number. Don, I think you have the add's actual numbers. Donald R. Shassian: Simon, the supplemental schedules we've got out there, our losses on the video side, which the prior 2 quarters were about at a 12,000 decline, 14,000 decline, with 10,000 declines for this quarter. And on the data side, it was about 5,000, 5,000. It's now about 3,000 this quarter. So it's really declining. We are not planning to implement a price change in Oregon and Washington. So the installation fee change is in all 3 areas, but no other pricing changes are forthcoming. And I think we're seeing a better local engagement. And just the normal churn, as Maggie mentioned, we're not pushing the growth of the FiOS product. Customers want the data. We obviously could provide that data, but we're not pushing that video side.

And one of the interesting things that we've seen in this trend, Simon, is we're losing more video customers than data customers. So we have seen disconnects on the video side, but the customers are keeping the FiOS broadband products with us, because it's the best in the market. Donald R. Shassian: And on the macro side, Simon, it's been very interesting. Northeast and southeast, there are still many businesses we're starting to see with much more optimism of opportunities. Not saying hiring a lot of people, but we're seeing some growth and expansion plans in building sites. It's starting to see a little bit more business activity, new businesses moving into those areas, and still feeling a little bit of optimism in those 2 regions. Midwest, it is very stable. Not seeing a downsizing of employees, but not seeing a lot of optimism. Central is doing the same thing. Our national region, which is around the country, really not seeing a lot. And the west is really on a hold. So it's really a lot of businesses outside of the East Coast are very reluctant to appear to make investments, to start hiring employees. We are seeing some temporary employee hiring, but not very robust. And it's sort of, if I give you -- that's what I would say is stagnant in the better regions. But we still have a little bit of sense of optimism on the 2 East Coast.

We'll go next to David Barden with Bank of America. David W. Barden - BofA Merrill Lynch, Research Division: Just first, Don, on the savings from the systems cutover. I think that, at the beginning, when we were talking about how the synergies would be realized, a lot of the conversation was about the bulk of these savings being related to the systems cutovers, beginning with the 4 states and then really kind of reaching its zenith with the big 9-state cutover. You guys have actually front-end loaded a lot of the synergies, and the targets haven't really changed. So has there been something about the savings rate that you're realizing from the cutover itself that's maybe lower than expected? Or are you just kind of being conservative about the synergy expectations that you're starting to see already from the 4-state cutover? Could you kind of talk about the savings from the cutover would be great. And then second, maybe for Don or Maggie, just on the CapEx, you guys seem to be targeting kind of 11% CapEx rate, and the idea is that if we cut our CapEx, we can have a lot more money and cover our dividend better. But one of the things Frontier isn't doing that other companies have been doing has been making investments in fiber and higher-speed capabilities to remote terminals, building up a video product, getting involved in data center business and other things for the advanced enterprise demand. And it seems like maybe strategically, lower CapEx isn't necessarily the best option, but it might be the better option near-term for the dividend. If you can kind of talk through your thinking on that, it'd be great. Donald R. Shassian: David, first on the synergies. One clarification, correction what you mentioned. The savings from the systems cutover was never going to be pro rata as they're cut over in a partial states or couple of states. It was always going to be the backend. So the savings on systems is going to be very pronounced once we complete the next 9. But we are still requiring assistance from Verizon to maintain the existing systems. And so that there is a big chunk of change on the IT side that will be harnessed in 2012. We've been very, very successful, I think, in getting out a lot of costs everywhere else, besides IT. And there certainly is, as you know, a higher target internally. And hopefully, as we develop our plans for the next 9 and final conversion, the timing of that and we've put in place a number of that initiative to -- they could come into play and once in place, we'll reaffirm our numbers and we'll tell you where we are. Obviously we're driving a much higher number, and I think the synergies have been there, definitely have been there. And you've talked to Maggie, and Maggie's, got a much higher target for this entire organization than obviously we've communicated publicly.

Absolutely. Donald R. Shassian: But we're only putting out that which we've got a clear line of sight to. And I simply also would caution, as we've done through these conversions, we've had to automate and make some enhancements to our systems to care for some highly-automated functionality that was in the Verizon systems. And in some cases, we've chosen not to automate it and we've chosen to do manual workarounds, and save the automation and the savings for that automation to a little point in time. As a result, we are hiring resources to do and care for some functionality that we're not automating. So they are built into our estimates of synergies, some dis-synergies if you would. You've got to hire some people to care for some things, to run the business the proper way. And those savings will then be taken out a year or so down the line where we've kept the conversions on and we can go after those savings. So now you can call me conservative. I sort of like being called conservative, that's great. But we feel very good and feel very anxious about the opportunities on the cost side of this.

Yes, I think Don is conservative, but we're not conservative within the organization. We're really pushing to get these synergies out. As he mentioned, there'll be a very substantial pot after we finished the 9 states. Because a lot of the fees are associated with license fees, so we're going to still use that software for the other 9 states until we convert off. But we feel very good about the $600 million number from a target perspective. And as we get into 2012, we'll continue to evaluate and assess what the synergy numbers look like, and we'll update guidance when we think that's appropriate or isn't appropriate. The one thing I will mention on the capital side, because I do want to set the record straight, we are not skimping on investing in strategic areas for the business. This year, we have guidance that's $750 million-plus in terms of what we're spending in capital. And I look at 2011 and 2012, these are big bubble years for the company because we are doing a lot on the broadband build side. But in addition to that, as we mentioned, even with the middle mile projects we've been doing to relieve congestion and to beef up our capabilities in the middle mile, we're investing in 2011 and '12 to have capacity for the next several years. So we want to make sure that we don't run into congestion problems as customers continue to increase their broadband usage. In addition to that, we have strategic capital that we've allocated to wireless backhaul. We are working with all of our major customers on that. We've been upgrading thousands of towers throughout our footprint. We're aggressively bidding on towers for RFPs for 2012. So we are not holding back on capital that we think is strategic for the revenue stream of the company on a go-forward basis. Donald R. Shassian: And we are putting fiber out to remote, pushing fiber very, very deep into our network. Daniel J. McCarthy: Yes, I was just saying, David, this is Dan, that if you look at what I talked about on the West Virginia side as far as that pretty fiber-rich ecosystem, we've replicated that same ecosystem in Illinois and Michigan and Indiana. We're doing it in Wisconsin and Ohio. And the vast majority of the costs associated with pushing broadband out is really the fiber out and the transport out to these lands that are being installed. So fiber is a critical component of the investment strategy, and it's been that way since we took over the properties.

We just think that over the next 2 years, because with broadband builds being intense and also backhaul being intense, in 2013 we do think capital will come down and it will come down, as Don said, to that 11% range. So it's not about us driving capital down just to push operating free cash flow. It's about driving capital down because we will have a lot of projects already completed. And the last comment I will make is dividend is safe. We're not sure of managing capital to pay for the dividend, we have residual free cash flow that will continue to generate every year that not only covers a dividend, but gives us a very good cushion. Donald R. Shassian: And David, I would just also add that we look at investments based on a return on the debt-to-capital we're going to make. We are a high dividend-paying stock. We have shareholders and debtholders to take care of, and we've got to earn a certain return for them. And we don't think that making investments in supplemental capital-intensive businesses and products is necessarily the best use of our cash. Getting access to those products to put through our channels? Definitely. Can it be done through an arrangement, through a partnership, through a venture? All through a lot of different ways, we need to increase the product suite, yes. But buying businesses that are capital-intensive like some of our peers have done, or investing in facility-based products, this return we think is beyond what is reasonable for our shareholders is not something we think is appropriate.

We'll go next to Mike McCormick with Nomura Securities. Michael McCormack - Nomura Securities Co. Ltd., Research Division: Just a couple of questions. Don, you'd mentioned briefly some of the local level conversions and what that means from a reporting standpoint. Can you give us a sense for what kind of flexibility that gives you with the promotions and pricing? And then 2 other little nits. One, the wireless strategy with AT&T, maybe Maggie you can address the change in strategy there. I know historically you go down the path of different wireless strategies and it seems like a bit of a change in direction as well. And then lastly, the FiOS loss, how much of that are you winning back on your high-speed data side? Donald R. Shassian: I'll take a shot first on conversions. Obviously with the 4 states coming up to our billing platform gives us all sorts of flexibility, but it has not limited us to-date. I think what it does give us is not the commercial aspect that's most important, it's the ability to be able to, for our employees, to be able to work off on one set of systems, one set of procedures and processes, and be able to go to market a lot cleaner and deal with customers a lot cleaner. So yes, we could do a lot more, but I think it simplifies internally significantly the ability to go to market, whether it's our technicians getting a full view of the customer, call center employees having a full view of the customer, implementing whether any price changes or promotions can be done and can be done very, very quickly. And it does significantly enhance the business. And obviously, we're very excited to get the other 9 states onto the platform as well, because it just takes a lot of complexity out of the business.

And Mike, I'll talk a little bit about the strategy for the company on wireless. I think as you know, we've been going down a path over the last several years in building Wi-Fi networks in our markets. We have 19 markets, we're building another 5 to 10 over the next 2 or 3 quarters, and we think we've really covered the data part of wireless very well in bundling that with our high-speed Internet service in our markets. But we also know that not having a wireless voice product also hurts us in the markets in the long run because we want to have the complete suite of products and services for our customers. And as the smaller player, we don't have spectrum in every market. We've looked at using the Wi-Fi networks for a voice solutions over those networks. But the amount of hardware that's created for that type of application and the stability of delivering that great customer experience. In the lab testings that we've done, we have not been satisfied that that's a good path for us to take. So what we looked at is, how do we still deliver a wireless voice product? How do we bundle that with our other products and services? We're not just going to get into the wireless voice business to be a me too from a cellular perspective. We want to look at it from a custom value pricing perspective, that the more the customer takes from us, the ease-of-use of using a one-stop shop, a one-bill approach, and actually promoting a product through a partner who has a great network in our market, we think is the right approach. So we look to change that direction over the last couple of months. We've been in negotiations, and I'm very pleased that AT&T Mobility will be our partner. They have, as you know, great products and services. We're going to leverage them as a partner agreement with an agency relationship. So we feel very good about this direction. And again, we're going to go out to several markets. We're going to trial this, get a good sense for how this changes our operations at the local level. So we really believe, especially in our larger markets, that this is a good play for us to have to keep the customers on service. Donald R. Shassian: For those customers who won't otherwise want to be with us.

Right, exactly. Donald R. Shassian: And it's really -- and it's not a standalone product, Mike. It is purely products bundled with broadband and everything else. So we're [indiscernible]. Michael McCormack - Nomura Securities Co. Ltd., Research Division: Is that feedback that you receive from customers from your loss debts [ph], can that -- did they want that as part of the bundle?

Yes. And I think they also like the fact that if they take the product sets from us, they get a benefit, either on other products or on that product by buying that through us as well. Similar to what we've done with DISH and DirecTV in our markets. And then the last point you mentioned was on FiOS and broadband. Donald R. Shassian: Mike, I'm not sure if I understood your question, but if losing a FiOS data customer really means that they are wanting to go somewhere else. Because if they want to keep -- if they want to disconnect the video but keep the data, we love it. We opt that one stay [ph]. We're not looking to convert anybody from a Fiber-to-the-Home to DSL solutions at home. We want to keep get them on that fiber. It's the better solution, better experience and that's great. I can't give you an answer about anybody who'd want to disconnect fiber and go to a different technology solution. We're not driving people there.

Yes, but we are offering the DSL service in those FiOS locations. So the customer, if they're new to Frontier, we are selling them the DSL high-speed as an alternative. We are still selling the FiOS data product as well, it's just a more expensive installation. So we do give the customer a choice point. Daniel J. McCarthy: And Mike, I haven't really seen anybody move from the fiber to the DSL when they have that choice point.

We'll take our last question from Frank Louthan with Raymond James. Frank G. Louthan - Raymond James & Associates, Inc., Research Division: Maybe you could just walk us through the churn decreases and the revenue improvements? Because churn has been improving, and we can see that in the numbers that you report. Yet the revenue still haven't really turned around, like I think the Street was expecting. So at what point when -- as you're looking for further improvements in churn, what is the point there where we should start to see that have the right impact on the revenue and start to see that stabilize? Donald R. Shassian: Well, Frank, the revenues, obviously -- you've got a churn issue and you've got a gross add issue. And so we're making very, very significant improvements in churn. We've also got to continue to lean in on the gross add side. So our broadband build is critical. Selling into the broadband area as newly booked areas, local engagement, and it's 1,000 points to write on this. It's not just churn. Churn is definitely improving. And your question underlies the thesis that says at what level does churn have to get to stabilize revenue? That's not an appropriate direction to go. Yes, we want to continue to drive churn down the legacy levels of 1.4%, but we also have got to get the gross adds side at work. You've got to get certain promotions, servers that conditions [ph], and our call center reps and all the employees selling on the gross add side to really lift it well north of any of the churn activities.

Yes, and I think as we have product expansion in these markets, especially from our broadband perspective, Frank, and especially in the acquired markets, there are huge win-back opportunities for us. Because we acquired a bunch of properties that didn't have broadband, so customers went elsewhere for service. So we are looking to bring those customers back on. We didn't talk a lot about win-back in West Virginia, but that's been a great success story in that marketplace as we've expanded capability for broadband and middle mile congestion relief. We are seeing customers come back on service with Frontier. So to me, as we've mentioned, we think we will start to see incremental revenue improvement in Q4, and that will build into Q1 and into Q2. So we will continue to see the efforts that we've had over the last year or 15 months start to pay off with the results from this quarter, Q4, and we will see that continue to accelerate into next year. Frank G. Louthan - Raymond James & Associates, Inc., Research Division: Okay, and then one lastly on the pension. You said you gave some land or real estate to the pension fund. What is the cash impact expected next year, when you have to make another pension deposit? And are there any other assets that you could use to avoid making a cash payment to the pension plan? Donald R. Shassian: Frank, that was 4 administrative ratings [ph] that are not regulated or in a rate-regulated environment. We were able to contribute in the fair market value. Obviously, there's a trustee on the other side. A lot of other companies have done this. And it enables us to offset cash contributions we expected rest of this year and a part of next year. We haven't seen the forecast of how much we're going to have to contribute for next year. It's going to be firmed up as we get to the end of the year and we get a better view of the AFTAP calculation's got to be done. Our previous estimate was we're going to do approximately a $50 million contribution in '12. This would offset approximately half, maybe more than half of that. I still think I'd still say it's in that ballpark. I don't see yet I can't get an idea of exactly, whether the contribution is going to go up or down for '12 until we get to the further -- into end of the year. But it's in that zone if that helps.

Well, thank you everybody for joining us for the call. We appreciate it. We feel very good that this was a solid quarter for Frontier. We're continuing to focus, I think, as we've had a lot of discussion on the revenue side of the business. And we're going to continue to stay the course in our network investments and also our synergy focus and our conversion. So there's more to come, and we'll look forward to talking with you on the Q4 earnings. Have a good day.

This does conclude today's conference call. We thank you for your participation.