After two failed attempts to smoothly spin off its aging landlines, Verizon Communications said it has completed the transfer of its local wireline operations in 14 states to Frontier Communications.
The spinoff, completed Thursday, has been approved by all five commissioners of the Federal Communications Commission and the new operation has made important concessions to unions, which have resisted many of Verizon's measures in the spinoffs. In a complicated stock transaction, Verizon stockholders will still own about 68% of the new operation.
In a move that pleased many union members, Maggie Wilderotter, Frontier's chairman and CEO, said the reconstituted firm will feature an Internet help desk unit that will be staffed by a 100% U.S.-based workforce. "This will include the creation of 500 new U.S.-based jobs replacing work that Verizon sent overseas," she said in a statement.
Verizon said the value of the transaction to its stockholders is about $8.6 billion with Verizon stockholders receiving $5.2 billion in Frontier common stock. Ivan Seidenberg, chairman and CEO of Verizon, hailed the deal and praised Frontier's management team.
Verizon and Frontier have gone to great lengths to avoid the problems encountered by two previous Verizon landline spinouts. One, in the northern New England states of Maine, New Hampshire, and Vermont, resulted in bankruptcy for the new operation, run by FairPoint Communications. The other, in Hawaii, also resulted in a bankruptcy.
Frontier has teamed up with networking infrastructure provider Adtran to deliver advanced platform and fiber technology to Frontier's customers. The new Frontier-Verizon operation will provide voice, high-speed Internet, wireless Internet data access, satellite video, FiOS, and other services to the more than 4 million residential and business customers that are served in Frontier's 27-state service area.
The new combined company embraces Verizon operations in 14 new state areas and becomes the largest pure rural telecommunications company in the United States. Frontier's acquisition of the Verizon assets essentially triples the size of Frontier in the deal, in which Frontier is paying $5.3 billion in stock and is taking on $3.3 billion in debt.
Verizon assets were added to Frontier in 14 states including Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia, Wisconsin, and some rural California regions.