Frontier late yesterday confirmed its plans to acquire Verizon lines in California, Texas and Florida for $10.5 billion– a move that will nearly double Frontier’s voice broadband and video lines and dramatically boost the number of customers served by high-speed DSL or fiber-to-the-home.
More than half of the lines to be acquired (54%) are FTTH-based FiOS lines. Combining those lines with FiOS lines that Frontier previously purchased from Verizon, with U-verse lines acquired from AT&T last year and with homes to which Frontier has deployed FTTH will yield Frontier a customer base that is 31% FiOS, FTTH, or U-verse-enabled. Previously that number was 14%.
Frontier also will increase its addressable households from 8.5 million to 14.5 million.
“We are expanding our footprint in large and growing markets,” said Frontier CEO Maggie Wilderotter on a conference call with investors and reporters yesterday. Verizon previously invested seven billion dollars in the properties Frontier is buying, Wilderotter said.
Based on data from a Frontier investor slide presentation, about 62% of homes in the new Verizon markets currently subscribe to voice service, while about 37% subscribe to broadband and 18% subscribe to video.
The deal is expected to close in the first half of 2016.
The Frontier/ Verizon Deal
Frontier is expecting a smoother transition in the new deal than when the company previously acquired lines in 14 states from Verizon in 2010.
The percentage of FiOS homes in those territories was considerably lower than in the new deal and Frontier had to invest billions of dollars to upgrade network facilities in which Verizon had under-invested. But Wilderotter said that won’t happen this time around because the new agreement calls for Verizon to continue to make capital and marketing investments in the sale properties until the deal closes.
“There are dollar amounts and commitments,” Wilderotter said.
Like most of the lines in the 2010 deal, the lines Frontier plans to acquire were owned by GTE until Verizon acquired GTE in 2000. As Frontier President and Chief Operating Officer Dan Murphy noted on yesterday’s call, that means Frontier has had experience in converting operational systems of the same type supporting those lines.
The company is so confident in its ability to handle a smooth transition that it plans to do a flash cut of operational systems when the deal closes. Wilderotter noted that Frontier previously used a flash cut on lines it purchased from Verizon in West Virginia and for the AT&T lines that it purchased in Connecticut.
According to a Wall Street Journal report, the lines that Verizon is selling represent about 24% of the company’s landline business. It is widely believed that the company made the decision to undertake the sale in order to pay for spectrum it won in the AWS-3 auction which closed last week and in which spectrum commanded higher prices than anticipated.
