Frontier To Buy Rural Verizon Lines For $5.3B

Analyst Christopher King at Stifel Nicolaus noted that buyers of Verizon phone lines have fared badly in the past — FairPoint is struggling with its debt load, and the buyer of Verizon's Hawaiian business has filed for bankruptcy protection. But King said Frontier will actually reduce its debt load relative to its earnings through the transaction.

FairPoint was beset by customer service problems after taking over the Verizon lines, and Sanford Bernstein analyst Craig Moffett said that would make it tougher for the Frontier-Verizon deal to pass muster with state regulators.

Two unions organizing more than 8,000 Verizon workers affected by the Frontier deal expressed "serious concerns," pointing to the problems that followed the FairPoint transaction. The International Brotherhood of Electrical Workers and the Communications Workers of America also questioned Frontier's ability to invest in broadband after assuming extra debt in the deal.

Wilderotter said Frontier would have no problem taking over Verizon's lines, because they come complete with Verizon's billing systems. He also said Frontier is far larger than FairPoint and better equipped to handle and expansion.

Frontier will be taking over 110,000 subscribers to Verizon's FiOS fiber-optic Internet service and 69,000 TV customers. Wilderotter said Frontier will continue to build out FiOS in areas where Verizon has started, to satisfy local TV franchise agreements.