We have two RLEC racing into bankruptcy. Frontier is laden with debt from buying legacy assets from VZ and AT&T. As cable won the residentia voice war as well as the broadband war (two-thirds), RLECs are straining to get B2B revenue to offset.
They are also spending on network upgrades to G.Fast, VDSL2 and Fiber-to-the-whatever (tower, curb, neighborhood, business or home).
Dividends are paid to make their stock attractive to institutional investors (like insurance companies and pension funds); to prop it up because execs at these LECs have lots of stock and options.
As debt increases and revenues remain flat (or in decline YoY), it gets harder to play this game of paying debt interest, dividends, CAPEX and salaries. In fact, many are nearing the end of the runway.
Frontier and Windstream will likely face the end first.
Windstream made some moves that didn’t work – like buying data centers (then selling them) and moving assets into REIT to save on taxes. The REIT is still being fought over by noteholders.
Seeking Alpha has a write up about why Windstream is in financial trouble: “Two years down the line, Windstream bonds are pricing a large probability of default, and Uniti shares have almost halved. A Windstream restructuring is a real possibility.”