The company providing landline phone service and associated products in Bryan/College Station is changing.
Officials have announced the sale of “wireline businesses” from Verizon Communications in Texas, California, and Florida to Frontier Communications.
The $10.54 billion dollar transaction is expected to close in the first six months of 2016, following federal and state regulatory approvals.
Verizon expects 11,000 employees, including those serving B/CS, to continue employment with Frontier.
The sale 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.
The sale to Frontier does not include Verizon Wireless.
Verizon’s parent company also announced selling 165 wireless towers and leasing another 11,300 to American Tower Corporation for $5.06 billion.
More from the Associated Press:
NEW YORK (AP) _ Verizon Communications says it will make almost $15 billion from selling part of its wireline business and leasing thousands of wireless towers.
The largest U.S. cellphone carrier is selling its California, Florida and Texas wireline businesses, which serve voice, video and Internet customers, to Frontier Communications Corp. for $9.9 billion in cash. Frontier is also taking on $600 million in debt.
Verizon says it wants to concentrate on the East Coast wireline business.
American Tower Corp. will pay $5.06 billion to lease 11,300 wireless towers and buy 165 towers.
Verizon Communications Inc. says it plans to return some of the cash to shareholders by spending $5 billion on buying back its stock.
News release from Frontier Communications:
STAMFORD, Conn.–(BUSINESS WIRE)– Frontier Communications Corporation (NASDAQ:FTR) is today announcing a definitive agreement with Verizon Communications Inc. (NYSE:VZ) under which Frontier will acquire Verizon’s wireline operations that provide services to residential, commercial and wholesale customers in California, Florida and Texas, for $10.54 billion in cash. These Verizon properties include 3.7 million voice connections, 2.2 million broadband connections, and 1.2 million FiOS® video connections. The network being acquired is the product of substantial capital investments by Verizon and is 54 percent FiOS enabled. Subject to regulatory approval, the transaction is expected to close in the first half of 2016.
“This transaction marks a natural evolution for our company and leverages our proven skills and established track record from previous integrations,” said Maggie Wilderotter, Frontier Communications Chairman and Chief Executive Officer. “These properties are a great fit for Frontier and will strengthen our presence in competitive suburban markets and accelerate our recent market share gains. We look forward to realizing the benefits this transaction will bring to our shareholders, customers and employees.”
Lowell C. McAdam, Chairman and Chief Executive Officer of Verizon, said, “This transaction will further strengthen Verizon’s focus on extending our leadership position in our core markets and create value for both Verizon and Frontier shareholders. Frontier has proven to be an excellent partner. Together we will ensure a smooth transition for our customers and employees, and I have no doubt these teams will continue putting the customer first.”
Dan McCarthy, Frontier’s President and Chief Operating Officer, commented, “This transaction is an exciting opportunity for Frontier. We are well-positioned to maximize value for our shareholders and create a great experience for new customers. We have four FiOS markets today from our 2010 transaction with Verizon, and a high level of familiarity with the systems underlying these properties. We plan to flash-cut convert these properties to Frontier’s systems as we did in states including West Virginia and Connecticut.”
The transaction provides substantial benefits, including:
Strong Revenues, Accretion to Free Cash Flow and Dividend Sustainability: The Verizon wireline operations being acquired by Frontier generated revenue of more than $5.7 billion in 2014. As a result of certain Verizon-allocated overhead costs not transferring to Frontier, or being replaced by Frontier’s lower cost structure, Frontier expects costs to be reduced by $525 million in the first year after close and $700 million by year three. Frontier expects the transaction to be 35 percent accretive to free cash flow per share in year one and to improve Frontier’s strong dividend payout ratio by 13 percentage points.
Delivers Significant Customer Benefits: Frontier expects a smooth transition for customers in its new markets. Frontier will extend its local engagement model of being active in the communities it serves and provide superior levels of customer service and differentiated offerings.
High-Quality Assets: Verizon has invested more than $7 billion in the buildout of FiOS in the acquired territories, which now enjoy a high availability of FiOS services: fully 54 percent of the acquired network is FiOS enabled.
Tax Structure: The transaction will be structured as an asset purchase for tax purposes; with an estimated net present value benefit of approximately $1.9 billion to Frontier and its shareholders.
Transaction Details, Terms and Approvals
Under the terms of the transaction, Frontier will pay Verizon $10.54 billion in cash at closing, representing 3.7x 2014E Pro Forma Day 1 EBITDA.
Frontier will finance this acquisition with the issuance of a combination of equity and equity-linked securities, as well as debt. Frontier has secured a commitment for bridge financing from J.P. Morgan, Bank of America Merrill Lynch and Citibank for 100 percent of the purchase price. The transaction is not subject to a financing condition.
The transaction is subject to regulatory approvals and customary closing conditions, including review by the U.S. Federal Communications Commission, the U.S. Department of Justice, and certain governmental authorities in the states covered. The transaction is expected to close in the first half of 2016.
News release from Verizon Communications:
NEW YORK – Verizon Communications Inc. (NYSE, Nasdaq: VZ) today announced two major transactions designed to further sharpen its strategic focus:
Verizon has reached a definitive agreement to sell its local wireline operations serving customers in California, Florida and Texas to Frontier Communications Corporation (Nasdaq: FTR). Frontier 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.
Verizon has agreed to lease the rights to over 11,300 of its company-owned wireless towers to American Tower Corporation (NYSE: AMT), which will also purchase approximately 165 Verizon towers, for a total upfront payment of approximately $5 billion.
At the same time, Verizon is returning a significant amount of capital to its shareholders through a $5 billion accelerated share-repurchase program entered into today.
Verizon Chairman and CEO Lowell McAdam said: “Our long-standing strategy has been to consistently invest in our networks, improve our customers’ experience, and develop new products and services while delivering profitable growth. These transactions will further strengthen Verizon’s focus on extending our industry leadership position in our core markets and return significant value to our shareholders.”
Details of the Verizon – Frontier Transaction
Selling wireline operations in California, Florida and Texas to Frontier will concentrate Verizon’s wireline operations on the East Coast. Verizon will focus on further penetrating the market for its FiOS business across a contiguous footprint in Eastern states.
Frontier currently has access lines in 28 states, providing an array of voice, broadband and video services, including landline assets purchased from Verizon in 2009-2010.
Maggie Wilderotter, Frontier’s chairman and chief executive officer, said: “These properties align with Frontier’s disciplined strategic focus and enhance our footprint with rich fiber-based assets. We look forward to building on the strong results Verizon has delivered in these three states. Frontier has a solid track record of successful integrations, and we welcome the new employees who will help us implement our local engagement model in these markets.”
Completion of the transaction is subject to customary closing conditions including, among others, obtaining certain regulatory approvals. The companies are targeting completing the transaction in the first half of 2016.
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.
As they did during the companies’ previous transaction, Verizon and Frontier transition teams will work to ensure that customer accounts, billing information and other assets from the operations are successfully transferred to Frontier and that the transition is seamless for customers as well as 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 fourth-quarter 2014, these operations served approximately 3.7 million voice connections; approximately 2.2 million high-speed data customers, including approximately 1.6 million FiOS Internet customers; and approximately 1.2 million FiOS Video 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.
The transaction does not include the services, offerings or assets of other Verizon businesses, such as Verizon Wireless and Verizon Enterprise Solutions.
As of the end of fourth-quarter 2014, the consumer and mass business wireline operations that Verizon is retaining provided service in nine states and the District of Columbia and had approximately 16.1 million wireline voice connections; 7.0 million high-speed data customers, including approximately 5.1 million FiOS Internet customers; and 4.5 million FiOS Video customers. The states in Verizon’s contiguous consumer wireline footprint are Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, Virginia and Washington, D.C.
Credit Suisse, Guggenheim Securities and PJT Partners advised Verizon on the transaction.
Details of the Verizon – American Tower Transaction
In the wireless tower transaction, American Tower will have exclusive rights to lease and operate over 11,300 Verizon cell towers, a significant majority of the towers the company currently owns. In addition, Verizon will sell approximately 165 towers outright.
The average term of the lease rights is about 28 years. As the leases expire, American Tower will have fixed-price purchase options to acquire these towers based on their anticipated fair market values at the end of the lease terms.
Verizon will sublease capacity on the towers from American Tower for a minimum of 10 years for $1,900 per month per site, with annual rent increases of 2 percent. Verizon will have customary renewal options that could potentially extend the full term of the sublease to 50 years.
Verizon will have access to additional reserve capacity on the towers for future use and expects to use this additional capacity to help continuously improve the nation’s most reliable network.
During the terms of the leases, American Tower will have full operating rights to and responsibilities for the towers. American Tower’s rights will include the ability to sublease other available space to other companies.
Verizon expects the transaction to close by mid-2015, subject to standard closing conditions.
$5 Billion Returned to Shareholders Through Share Repurchase
Under the terms of the accelerated stock repurchase (ASR) agreement, Verizon will repurchase $5 billion of its common stock and expects to receive an initial delivery of shares having a value of approximately $4.25 billion. The total number of shares that Verizon will repurchase under the ASR agreement will be based generally upon the volume-weighted average share price of Verizon’s common stock during the term of the transaction.
Final settlement of the transaction under the ASR agreement, including delivery of the remaining shares that Verizon expects to receive, is scheduled to occur in the second quarter of 2015. Verizon is funding the ASR with cash on hand.
The ASR is in addition to Verizon’s three-year share repurchase program announced on March 7, 2014. Under the three-year program, Verizon is authorized to repurchase 100 million shares of its common stock. That program is set to terminate on Feb. 28, 2017, or when the aggregate number of shares purchased under the program reaches 100 million, whichever date is earlier. To date, no shares have been repurchased under the program.