Verizon Sells Landline Assets for $8.6 Billion

Verizon Communications, the 55% owner of Verizon Wireless has announced plans to sell its landline operations in predominantly rural areas in 14 states to Frontier Communications in an all-stock deal worth US$8.6 billion.

Ivan Seidenberg, chairman and chief executive officer of Verizon, said: "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."

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.

Transaction Details, Tax-Free Distribution

The acquired operations will be spun off in a new entity, which will be immediately merged into Frontier. Verizon shareholders will receive approximately $5.3 billion of Frontier shares in the merger. Verizon will receive approximately $3.3 billion in value through a combination of cash distributions to Verizon, debt securities issued to Verizon prior to the spinoff and assumption of certain debt previously issued by Verizon's telephone company subsidiaries. Verizon may exchange the newly issued debt securities for certain debt that was previously issued by Verizon, which would reduce the amount of outstanding debt on Verizon's balance sheet.

Both the spinoff and merger are expected to qualify as tax-free transactions, except to the extent that cash is paid to Verizon shareholders in lieu of fractional shares.

Verizon Communications will not own any shares in Frontier after the merger.

Posted to the site on 13th May 2009