Tuesday, May 12, 2009

Verizon to Divest Wireline Businesses in 14 States, Focus on Wireless

Verizon will divest its local wireline operations serving residential and small-business customers in predominantly rural areas in 14 states by selling these operations to Frontier Communications. The deal includes switched and special access lines, as well as its Internet service and long-distance voice accounts. Also included are fiber-to-the-premises (FTTP) assets deployed by Verizon in 41 local franchises and the state of Indiana. The deal does not include services, offerings or assets of Verizon Wireless or Verizon Business (former MCI).

The rural landline divestiture will further accelerate Verizon's focus on wireless, broadband and global IP. After the sale is completed, Verizon will generate approximately 62% of its revenue from wireless.

The transaction is expected to return a total value of $8.6 billion to Verizon and its shareholders.

The operations Frontier will acquire include all of Verizon's local wireline operating territories in Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia and Wisconsin. In addition, the transaction will include a small number of Verizon's exchanges in California, including those bordering Arizona, Nevada and Oregon. As of year-end 2008, these operations served approximately 4.8 million local access lines; 2.2 million long-distance customers; 1.0 million high-speed data customers, including approximately 110,000 FiOS Internet customers; and 69,000 FiOS TV customers. Approximately 11,000 Verizon company employees -- those who primarily support the local phone business that is being acquired -- will continue employment with Frontier after the merger.

Frontier said the acquisition will bolster its position as a premier rural communications provider. Frontier, which had previously acquired landline assets from Verizon between 1993 and 2000, currently has approximately 2.3 million access lines in 24 states, providing an array of services, including local and long-distance voice, broadband data, and video.

"This transaction is an attractive way to add value through a special distribution to our shareholders. Longer term, this transaction is part of our multiyear effort to transform our growth profile and asset base to focus on wireless, FiOS fiber-optic services and other broadband development, and global IP. All of Verizon's remaining local landline operations have high concentrations of FiOS in more densely populated markets. We believe our focus on reshaping our asset base will drive higher growth over time and improve long-term returns," stated Ivan Seidenberg, chairman and chief executive officer of Verizon.

Barclays Capital Inc. and JP Morgan Securities Inc. advised Verizon in the transaction.