May 13, 2009, 12:59 PM — Verizon has struck a deal to sell off rural residential access line business in 14 states to Frontier Communications, which already owns rural lines in 11 of those states.
Verizon says that shedding these access lines cashes in on assets that don't align with its core businesses of wireless, broadband and global IP services.
The $8.6 billion agreement consists of $3.33 billion cash to Verizon combined with the assumption of debt by Frontier. The deal also includes $5.25 billion in stock. The companies say they will close the deal in 12 months.
Frontier will wind up with a total of 7 million access lines in 27 states, a dramatic increase over its current 2.3 million lines in 24 states. Had the deal been in place during fiscal year 2008, revenues for the company would have been $7 billion. By itself, Frontier took in $2.3 billion that year.
Most of the customers involved live in rural areas of Arizona, California, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, Wisconsin and West Virginia. The purchase greatly increases Frontier's penetration into Illinois, Indiana, Michigan and particularly West Virginia.
Frontier says it plans to boost its broadband infrastructure to its customers and, while most of its business is in residential services, it plans to develop bundled services for small businesses and improve its long distance offerings.
