Verizon Acquiring Frontier in $20B Deal
Verizon will purchase Frontier in a $20 billion all-cash valued transaction, the companies announced Thursday. The deal is expected to close in 18 months, subject to regulatory and Frontier shareholder approval. Verizon will gain 2.2 million fiber subscribers, extending the company's network reach to 25 million locations across 31 states and Washington, D.C., as a result. Frontier also renewed a commitment to build out an additional 2.8 million fiber locations by the end of 2026.
"The acquisition of Frontier is a strategic fit" because it will allow Verizon to "become more competitive in more markets throughout the United States," said Verizon Chairman-CEO Hans Vestberg. The announcement, Frontier President-CEO Nick Jeffery said, is "recognition of our progress building a best-in-class fiber network" and a "vote of confidence for the future of fiber." Jeffery added that he is "confident that this delivers a significant and certain cash premium" to company shareholders "while creating exciting new opportunities for our employees and expanding access to reliable connectivity for more Americans."
In a shareholder meeting Thursday, Vestberg said the acquisition will "significantly expand Verizon's fiber footprint" and provide access to a "high-quality customer base in markets nationwide that are highly complementary with our northeast and mid-Atlantic focus." Verizon will be "the only carrier that will have size and scale in both fiber and fixed wireless access" at the close of this deal, he said, noting the company will be expanding its footprint to 22 new states.
As part of the deal, Verizon will refinance Frontier's debt and inherit the company's net operating tax losses, Verizon CFO Tony Skiadas told shareholders. "We see significant opportunities to realize synergies as part of this acquisition," Skiadas said. Verizon is confident it will see "at least $500 million" of run-rate operating cost synergies by the third year following the close of the deal through network integration, go-to-market savings, mobile and at-home service cross-selling, as well as savings from duplicative functions and other efficiencies, he said.
Verizon hasn't changed its strategic view on the role of fixed wireless access, Vestberg noted, but "it's a great product" and "when we deployed the C-band, we put mobility as the number one priority and then fixed wireless opportunity comes along with it." The company also "could have continued to build with our fiber outside the [incumbent local exchange carrier] but the economics of this deal and the time to market was of course very, very appealing for us."
The National Association of State Utility Consumer Advocates questioned what the deal means for Frontier’s copper network. “The decision by Verizon to reverse course and acquire Frontier, thereby resuming ownership of the telecom landlines it sold to Frontier a few years ago, raises important public interest concerns,” Regina Costa, NASUCA Telecom Committee chair, said in an email. “Verizon's copper network had in many places fallen into disrepair due to lack of maintenance and inadequate staff,” she said. “This was the network Frontier inherited, along with FiOS fiber facilities.”
Verizon’s goal may be to add fiber, but it’s “imperative that the terms of this transaction address the poor quality of Verizon's copper network, and ensure that all of Frontier's wireline customers, including those served by copper and fiber, receive reliable, affordable service,” said Costa, who is also telecom policy director for California consumer advocate The Utility Reform Network. “This transaction should not be used as a means of escaping the obligation to provide essential telecommunications services throughout Frontier's current territory.”
California and many other states will review the deal. In 2015, the California Public Utilities Commission imposed conditions on Frontier’s acquisition of Verizon's wireline assets (see 1512030059). The next year, California and the two other states involved in that deal -- Florida and Texas -- scrutinized Frontier’s troubles migrating Verizon customers to its network (see 1610130059 and 1605090043). More recently, the CPUC has examined Verizon’s separate challenges migrating wireless customers after acquiring Tracfone (see 2402230055).
Another state where Verizon/Frontier will need commission approval is Connecticut, Frontier's base for years before relocating to Texas in 2023. A Connecticut Public Utilities Regulatory Authority (PURA) spokesperson said Frontier is a public service company that is “subject to Title 16 of Connecticut General Statutes, including provisions related to mergers, acquisitions, and changes of control.” However, neither company has yet sought PURA approval for the announced deal, the spokesperson emailed. “As a matter of policy and because no details of the transaction have been filed with the Authority, the Authority cannot informally opine on whether or to what extent statutory provisions apply to a transaction.”
Connecticut Consumer Counsel Claire Coleman said her office would be a mandatory party in PURA's proceeding. “Our team looks forward to reviewing proposed merger plans to ensure that the integrity of the service provided to and the protections in place for consumers of our incumbent telephone operator are maintained, and to the extent possible, strengthened."
The Florida Public Service Commission won’t get a say, however. “We do not have jurisdiction over utility purchases or mergers, so the Florida PSC will not be reviewing this purchase,” the agency’s spokesperson said in an email. “Our regulation over the telecommunications industry is very limited.” Utility commissions in the other two states that reviewed the 2015 Frontier/Verizon deal, California and Texas, didn’t comment Thursday.
The FCC didn't comment on the announcement.