FairPoint Communications began taking over Verizon Communications' landline operation in northern New England on Monday after last minute challenges over financing concerns were resolved Sunday.
The deal was approved in last minute emergency hearings by utility regulators in Maine, New Hampshire and Vermont.
Regulators in the three states have questioned the financial strength of FairPoint from the beginning when the takeover was first announced in January of 2007. When news spread last week that the North Carolina company was required to spend an additional $17 million for bonds to finance the $2.4 billion new business, regulators and Verizon unions became alarmed.
Verizon has been shedding some low-profit operations -- including telephone directories and landline operations in rural states -- to concentrate on operations with higher technology content like its FiOS fiber cable system and Verizon Wireless that promise higher returns.
The telecommunications company's approach was underlined last week in a Boston speech by Verizon chairman and chief executive officer Ivan Seidenberg who noted that the company is emphasizing new broadband technologies in its future investment. He added that he viewed Massachusetts as an important market where Verizon has spent $3 billion over the past five years.
The FairPoint transfer follows Verizon's transfer of its Hawaii landline operation to the Carlyle Group. While the Carlyle Group has deep enough pockets to run Hawaiian Telecom, it has run into several hurdles in running the company and top executives and consumers have left the company. Last month, Carlyle brought in Stephen Cooper, a turnaround specialist with experience at Enron and Krispy Kreme, to seek to halt the losses at Hawaiian Telecom, which reported a $29.5 million loss in its third quarter.
FairPoint promised a smooth changeover Monday in its northern New England operation. "Monday for most Mainers will be just like any other Monday," Maine Public Utilities Commission chairman Kurt Adams said in a prepared statement.
New Hampshire and Vermont commissioners weren't particularly sanguine about the transfer. New Hampshire commissioner Graham Morrison has argued against the transfer for months, questioning whether FairPoint has the financial wherewithal to meet its promised obligations. He voted against the transfer, but the other two New Hampshire commissioners favored it after they and commissioners from Maine and Vermont extracted additional concessions from Verizon and FairPoint.
A FairPoint executive cited credit reports from Standard & Poor's and JPMorgan that he said showed that the FairPoint takeover was financially sound. Verizon retirees were already grumbling about the transfer and cited a new communication from Verizon last week informing them that their free telephone calling privileges were being trimmed and they will be responsible for paying new taxes.