Verizon Communications Inc. has sold off most of its phone service areas outside of California and the Northeast to Frontier Communications Corp. Frontier, which specializes in rural and small-town phone services, will triple in size after the deal, according to the AP. Frontier will own 4.8 million residential and small business phone lines and 1 million broadband connections.
“This is a truly transformational transaction for Frontier,” Maggie Wilderotter, Frontier’s chief executive, said in a statement. “With more than 7 million access lines in 27 states, we will be the largest provider of voice, broadband and video services focused on rural to smaller city markets in the United States.”
The sale includes all of Verizon’s phone lines in Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia and Wisconsin as well as some assets in border areas of California.
The deal continues Verizon’s strategy of focusing on its core areas, where it is upgrading its phone lines to fiber optics, enabling it offer TV service and faster Internet access. It sold off its phone lines in Maine, New Hampshire and Vermont for $2.3 billion last year to Fairpoint Communications Inc.
The New York Times explains the financial details of the deal:
As part of the spinoff, Verizon’s shareholders will receive stock in Frontier giving them a stake of about 68 percent in the combined company. Exact terms of the exchange will depend on where Frontier’s shares are trading shortly before the deal closes, subject to limits in the form of a “collar.”
The boards of directors of both companies have approved the transaction, which is expected to close in 12 months, Frontier said.
Verizon said the spinoff would also deliver value of about $3.3 billion through cash and debt that Verizon would receive before the spinoff, as well as debt issued by Verizon subsidiaries that Frontier would assume. Including debt, the deal has a value of about $8.6 billion.