Looking to focus on large markets and divest itself of rural landlines,
Verizon (NYSE:VZ) will sell 4.8 million access lines in 14 states to Frontier
Communications (NYSE:FTR).
The all-stock $8.6 billion deal will puts Frontier at the top of the heap in
terms of rural telecommunications providers, and it will make Frontier the
nation’s fifth largest incumbent local exchange carrier (ILEC), the companies
said in a statement.
“This is a truly transformational transaction for Frontier,” Frontier Chairman
and CEO Maggie Wilderotter says in a formal
statement issued by the company. “With more than 7 million access lines in 27
states, we will be the largest pure rural communications provider of voice,
broadband and video services in the U.S.”
Wilderotter adds that Frontier expects to dramatically increase broadband
penetration in these markets.
For Verizon, the deal is part of the telecom provider’s multiyear effort to put
more focus on wireless, broadband and global IP, according to Chairman and CEO
Ivan Seidenberg.
“Frontier knows how to run wireline communications services well and has a
top-notch management team to take these properties to the next level,” he says
in a prepared statement. “I am confident the company will provide the
employees in these states with opportunities as it focuses on growth and an
expanded portfolio of products in those markets.”
The sale includes all of Verizon’s phone lines in Arizona,
Idaho, Illinois,
Indiana, Michigan,
Nevada, North
Carolina, Ohio,
Oregon, Sough Carolina,
Washington and West Virginia,
plus some lines in border areas of California.
Approximately 11,000 Verizon employees will move to Frontier as a part of the
deal.
Frontier will offer broadband, new bundled services and expanded technologies
to customers across its expanded geographic footprint.
According to the terms of the deal, existing Verizon shareholders will receive
stock issued by Frontier for the purchase. Verizon will establish a separate
newly formed entity called SpinCo for its local exchanges and related business
assets in 14 states. SpinCo will be spun off to Verizon’s shareholders and
simultaneously merged with and into Frontier. The companies said the
transaction has been approved by their respective boards and the deal is
expected to be completed within 12 months.
Frontier says that for the fiscal year ended 2008, the combined company will have
had on a pro forma basis revenue in excess of $6.5 billion