Verizon to Sell its Rural Phone Lines in 14 States

In an effort to focus on wireless and broadband services in order to deliver high quality services, Verizon Communications Inc will sell 4.8 million rural phone lines in 14 states of the US to Frontier Communications Inc for $5.25 billion in stock. This move became necessary when Verizon realized that there is needs to get rid of a declining business to focus more on the wireless and broadband services.
As more consumers drop landlines, they’re becoming more expensive to service and as such a bigger drain on some carriers’ bottom lines. This is leading to consolidation among rural carriers as they seek scale in order to compete. This deal appear to be beneficiary on both sides. For Frontier, the transaction will create the largest pure rural communications services provider and the nation’s fifth largest incumbent local exchange carrier (ILEC) with more than 7 million access lines, 8.6 million voice and broadband connections and 16,000 employees in 27 states.
Frontier will acquire Verizon access lines in Arizona, California, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, Wisconsin and West Virginia. Frontier currently provides phone, video, Internet and broadband services to more than 2 million customers in 24 states, including 11 of the states that are part of the agreement announced today. The Verizon properties include approximately 4.8 million access lines, with 1.0 million High-Speed Internet customers, 2.2 million long-distance customers, 164,000 DirecTV customers and 69,000 FiOS video customers.
Under the terms of the agreement, Verizon will establish a separate newly formed entity (“SpinCo”) for its local exchanges and related business assets in 14 states. SpinCo will be spun off to Verizon’s shareholders and simultaneously merged with and into Frontier. The transaction has been approved by the Boards of Directors of Frontier and Verizon, and is expected to be completed within approximately 12 months.