Frontier To Buy Rural Verizon Lines For $5.3B

Verizon shareholders will receive one share of Frontier stock for approximately every 4.2 shares of Verizon stock, depending on the price of Frontier shares at closing, which is expected within a year.

Frontier shares fell 28 cents, or 3.7 percent, to $7.29 in trading Wednesday. Verizon shares fell 65 cents, or 2.1 percent, to close at $29.75.

Verizon is also extracting $3.3 billion from the units before selling them off, by having them pay cash to the parent company and letting them assume debt.

Frontier will issue so much stock to Verizon shareholders that they will end up owning 68 percent of the company.

"This is a truly transformational transaction for Frontier," said Maggie Wilderotter, Frontier's chief executive. "With more than 7 million access lines in 27 states, we will be the largest provider of voice, broadband and video services focused on rural to smaller city markets in the United States."

Frontier also said it is cutting its annual dividend to 75 cents from $1, freeing cash to invest in the acquired areas, including for broadband buildouts. The cut takes its dividend yield to 9.9 percent.