Verizon Communications is fleeing the crufty wireline communications world as fast as it can and has turned once again to Frontier to buy its fiber and telephony assets in Texas, Florida and California in a deal valued at $10.54 billion. It also has signed a deal to lease 11,300 of its company-owned cellular towers to American Tower Corp., which will also purchase approximately 165 Verizon towers, for a total upfront payment of approximately $5 billion.
These deals will help [company]Verizon [/company]continue to invest in wireless spectrum. In last week’s auction, Verizon pledged $10.4 billion, about what it spent in the 2008 700 megahertz auction that netted Big Red the airwaves that it later used for its LTE network. But in addition to financing its spectrum buys, the deal with Frontier gets Verizon out of a significant chunk of the wireline market, leaving it with a footprint only in the densely populated Northeastern region where it had deployed its FioS Fiber to the Home and is trying to get rid of its copper-based network and landline service.
As we explained when Verizon sold its rural network to Frontier back in 2009 for $8.6 billion, Verizon has been trying to get out of the copper landline and circuit-switch voice business for years. Now it may be trying to get further and further away from physical assets entirely.
In the wireline transaction, [company]Frontier[/company] will pay Verizon approximately $10.54 billion (approximately $9.9 billion in cash, plus $600 million in assumed debt) for the business and related assets in these states. Approximately 11,000 Verizon company employees are expected to continue employment with Frontier after the transaction. Frontier and Verizon will provide a smooth transition for these employees.
The operations Frontier will acquire consist of all of Verizon’s local wireline operating territories in California, Florida and Texas. At the end of Q4 2014, these operations served approximately 3.7 million voice connections, 1.2 million FiOS Video customers and 2.2 million high-speed data customers, including approximately 1.6 million FiOS Internet customers.
The transaction includes Verizon’s FiOS internet and video customers, switched and special access lines, as well as its high-speed Internet service and long-distance voice accounts in these three states. Frontier will continue to provide video services in these states after the completion of the transaction.
Verizon will continue to serve about 16.1 million wireline voice customer, 5.1 million FiOS customers, 7 million broadband customers and 4.5 million FiOS video customers after the transaction closes in nine states and Washington D.C. The Frontier transaction should close in the first half of 2016 pending shareholder and regulatory approvals. The tower transaction should close by mid-2015, subject to standard closing conditions.