Frontier Communications: How It Bought Verizon’s Wireline Assets in Three States
Frontier Communications is a telecommunications company that provides voice, broadband and video services to customers in rural areas and smaller cities. In 2015, Frontier announced that it would acquire Verizon’s wireline assets in California, Florida and Texas for $10.5 billion. This was the second time that Frontier bought Verizon’s landline operations, after a previous deal in 2010 that involved 14 states. Here is a brief overview of how Frontier acquired Verizon’s wireline assets and what it means for the customers and the industry.
The 2015 Deal
The 2015 deal between Frontier and Verizon was announced on February 5, 2015. It involved the transfer of Verizon’s wireline operations in three states: California, Florida and Texas. These were the remaining GTE properties that Verizon had inherited from its merger with Bell Atlantic in 2000. The transaction included Verizon’s FiOS Internet and Video customers, switched and special access lines, high-speed Internet service and long-distance voice accounts in these three states. However, it did not include the services, offerings or assets of other Verizon businesses, such as Verizon Wireless and Verizon Enterprise Solutions.
The deal was valued at $10.5 billion, which consisted of $9.9 billion in cash and $600 million in assumed debt. Frontier expected to achieve annual cost synergies of $700 million by 2018. The deal was subject to regulatory approvals from the Federal Communications Commission (FCC), the Department of Justice (DOJ), the Federal Trade Commission (FTC) and state public utility commissions. The deal was also subject to approval by Frontier’s shareholders and Verizon’s board of directors.
The deal was completed on April 1, 2016, after receiving all the necessary approvals. Frontier took over Verizon’s wireline operations in these three states and added about 3.7 million voice connections, 2.2 million broadband customers and 1.2 million FiOS Video customers to its customer base. Frontier also gained access to about 54,000 route miles of fiber-optic network in these states.
The 2010 Deal
The 2010 deal between Frontier and Verizon was announced on May 13, 2009. It involved the transfer of Verizon’s local exchange networks in Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia and Wisconsin, and a portion of Verizon’s local exchange networks in California. The transaction included about 4.8 million access lines and about 1 million broadband customers.
The deal was valued at $8.6 billion, which consisted of $5.3 billion in stock and $3.3 billion in debt assumption. Frontier expected to achieve annual cost savings of $500 million by 2012. The deal was subject to regulatory approvals from the FCC, the DOJ, the FTC and state public utility commissions. The deal was also subject to approval by Frontier’s shareholders and Verizon’s board of directors.
The deal was completed on July 1, 2010, after receiving all the necessary approvals. Frontier took over Verizon’s local exchange networks in these states and became the largest provider of communications services focused on rural America.
The deals between Frontier and Verizon were part of a larger trend of consolidation and divestiture in the telecommunications industry. For Verizon, the deals allowed it to focus on its more profitable wireless and enterprise businesses and to reduce its debt load after acquiring spectrum licenses in the AWS-3 auction. For Frontier, the deals allowed it to expand its footprint and customer base and to offer more advanced services such as FiOS Internet and Video.
However, the deals also posed some challenges for both companies and their customers. For Verizon, the deals meant losing some revenue streams from its wireline operations and facing potential competition from Frontier in some markets where it still offered wireless services. For Frontier, the deals meant taking on a large amount of debt and integrating a massive number of customers and assets from different systems and platforms. Some customers experienced service disruptions or billing issues during the transition period.
Overall, the deals between Frontier and Verizon were significant events in the history of the telecommunications industry that reshaped the competitive landscape and affected millions of customers across the country.