Things are always changing in the rough-and-tumble telecommunications game. While Jim Cramer has been talking up smart phones and wireless infrastructure for weeks, he took time out to examine another side of the telecom sector -- local landlines. Frontier Communications ( FTR) made waves back in May when it announced plans to build its extensive rural land line network. Frontier announced plans to scoop up
4.8 million landlines from Verizon ( VZ) for $5.25 billion in stock. The company sells local and long distance to customers in 24 states, while also offering broadband services. The Stamford-based outfit also offers an array of television cable services and packages, partnering with the DISH network. "Rural is truly our business," CEO Maggie Wilderotter said on last night's "Mad Money." In May, too, the company reported that its first quarter sales fell 5% to $538 million, off from the $569.2 million posted in the year-ago quarter. When the deal closes, for every 4.2 of their shares, Verizon shareholders will receive one Frontier share. In the process, Frontier will become the largest rural phone carrier in the U.S., with 7 million access lines, 8.6 million voice and broadband connections and 16,000 employees in 27 states, according to a press release. According to Wilderotter, the transaction will triple the size of Frontier and add about $500 million in cost savings. Cramer also added last night that the deal will increase the company's broadband penetration, and that's the sweet spot. In the company's previous year-end statement, Frontier said it lost 174,800 access lines, but add 57,100 high-speed Internet subscribers during the previous year. During the first quarter, the company reported that it added 20,100 high speed subscribers, along with another 26,100 video subscribers through DISH.
Cramer raised his concerns about the company's dividend yield with Wilderotter and discussed the transaction. Wilderotter, a former Microsoft executive who joined Frontier as President and CEO in November 2004, addressed the issues. When it was over, Cramer left the conversation feeling good about the company, but only after Verizon shareholders eventually unload those Frontier shares. Shares were down 0.5%, or 3 cents, at $6.62 in mid-day trading.