More than 50% of Acquired Network is FiOS® Enabled
Transaction Expected to be 35% Accretive to Free Cash Flow Per Share
in Year One
Expands Footprint in Key Markets
Frontier to Host Conference Call on February 5 at 4:30 p.m. ET to
Discuss Transaction; Presentation to be Posted at 4:15 p.m. ET
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.
Conference Call/Webcast
Frontier will host a conference call on Thursday, February 5, 2015 at
4:30 PM Eastern to discuss the transaction. The conference call may be
accessed by dialing 877-718-5108 for callers dialing from the U.S. or
Canada, and 719-325-4794 for those dialing from outside the U.S. or
Canada. The conference call ID number is 3293038. A simultaneous
webcast, including an investor presentation, can be accessed by visiting
Frontier’s Investor Relations website.
A replay of the conference call will be available from Thursday,
February 5, 2015 at 8:00 PM until Tuesday, February 10, 2015 at 8:00 PM
and may be accessed by visiting Frontier’s website or by dialing
877-718-5108 (access code 3293038) for U.S. and Canadian callers and
719-325-4794 (access code 3293038) for other callers.
Advisors
J.P. Morgan Securities LLC is lead financial and strategic advisor to
Frontier, and Skadden, Arps, Slate, Meagher & Flom LLP is legal counsel.
Greenhill & Co. acted as advisor to Frontier’s Board of Directors.
About Frontier Communications
Frontier Communications Corporation (NASDAQ:FTR) offers broadband,
voice, video, wireless Internet data access, Frontier
Secure data security solutions, bundled offerings and specialized
bundles for residential customers, small businesses and home offices,
and advanced communications for medium and large businesses in 28
states. Frontier’s approximately 17,400 employees are based entirely
in the United States. More information is available at www.frontier.com
and www.frontier.com/ir.
Forward-Looking Statements
This report contains “forward-looking statements,” statements related to
future, not past, events. Forward-looking statements address our
expected future business and financial performance and financial
condition, and contain words such as “expect,” “anticipate,” “intend,”
“plan,” “believe,” “seek,” “see,” “will,” “would,” or “target.”
Forward-looking statements by their nature address matters that are, to
different degrees, uncertain. Particular uncertainties that could cause
our actual results to be materially different than those expressed in
our forward-looking statements include: risks related to the pending
acquisition of properties from Verizon, including our ability to
complete the acquisition of such operations, our ability to successfully
integrate operations, our ability to realize anticipated cost savings,
sufficiency of the assets to be acquired from Verizon, our ability to
migrate Verizon’s operations from Verizon owned and operated systems and
processes to our owned and operated systems and processes successfully,
failure to enter into or obtain, or delays in entering into or
obtaining, certain agreements and consents necessary to operate the
acquired business as planned, failure to obtain, delays in obtaining or
adverse conditions contained in any required regulatory approvals for
the acquisition, and increased expenses incurred due to activities
related to the transaction; risks related to the recently-concluded
Connecticut acquisition, including our ability to successfully integrate
the Connecticut operations, diversion of management ’s attention,
effects of increased expenses or unanticipated liabilities, and our
ability to realize anticipated cost savings; our ability to meet our
debt and debt service obligations; competition from cable, wireless and
other wireline carriers and the risk that we will not respond on a
timely or profitable basis; our ability to successfully adjust to
changes in the communications industry, including the effects of
technological changes and competition on our capital expenditures,
products and service offerings; reductions in the number of our voice
customers that we cannot offset with increases in broadband subscribers
and sales of other products and services; our ability to maintain
relationships with customers, employees or suppliers; the impact of
regulation and regulatory, investigative and legal proceedings and legal
compliance risks; continued reductions in switched access revenues as a
result of regulation, competition or technology substitutions; the
effects of changes in the availability of federal and state universal
service funding or other subsidies to us and our competitors; our
ability to effectively manage service quality in our territories and
meet mandated service quality metrics; our ability to successfully
introduce new product offerings; the effects of changes in accounting
policies or practices, including potential future impairment charges
with respect to our intangible assets; our ability to effectively manage
our operations, operating expenses, capital expenditures, debt service
requirements and cash paid for income taxes and liquidity, which may
affect payment of dividends on our common shares; the effects of changes
in both general and local economic conditions on the markets that we
serve; the effects of increased medical expenses and pension and
postemployment expenses; the effects of changes in income tax rates, tax
laws, regulations or rulings, or federal or state tax assessments; our
ability to successfully renegotiate union contracts; changes in pension
plan assumptions and/or the value of our pension plan assets, which
could require us to make increased contributions to the pension plan in
2015 and beyond; adverse changes in the credit markets or in the ratings
given to our debt securities by nationally accredited ratings
organizations, which could limit or restrict the ability, or increase
the cost, of financing to us; the effects of state regulatory cash
management practices that could limit our ability to transfer cash among
our subsidiaries or dividend funds up to the parent company; the effects
of severe weather events or other natural or man-made disasters, which
may increase our operating expenses or adversely impact customer
revenue; and the impact of potential information technology or data
security breaches or other disruptions. These and other uncertainties
related to the Company’s business are described in greater detail in the
Company’s filings with the U.S. Securities and Exchange Commission,
including the Company’s reports on Forms 10-K and 10-Q, and the
foregoing information should be read in conjunction with these filings.
The Company does not intend to update or revise these forward-looking
statements.

Frontier Communications
Investors:
Luke
Szymczak, 203-614-5044
Vice President, Investor Relations
luke.szymczak@ftr.com
or
Media:
Steve
Crosby, 916-206-8198
Senior Vice President, Corporate Communications
steven.crosby@ftr.com
or
Brigid
Smith, 203-614-5042
AVP, Corporate Communications
brigid.smith@ftr.com
Source: Frontier Communications Corporation