Verizon Sells 3.7 Million Lines, 7.1 Revenue Generating Units to Frontier Communications

Verizon Communications will sell its fixed network business in California, Florida and Texas to Frontier Communications Corporation for $10.54 billion (approximately $9.9 billion in cash, plus $600 million in assumed debt) for the business and related assets in these states.

At the end of fourth-quarter 2014, these operations served approximately 3.7 million voice connections; approximately 2.2 million high-speed data customers, including approximately 1.6 million FiOS Internet customers; and approximately 1.2 million FiOS Video customers.

The transaction includes Verizon’s FiOS Internet and Video customers, switched and special access lines, as well as its high-speed Internet service and long-distance voice accounts in these three states.

The consumer and small business wireline operations that Verizon is retaining provide service in nine states and the District of Columbia and had approximately 16.1 million wireline voice connections; seven million high-speed data customers, including approximately 5.1 million FiOS Internet customers; and 4.5 million FiOS Video customers.

The states in Verizon’s contiguous consumer wireline footprint are Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, Virginia and Washington, D.C.

At the same time, Verizon is returning a significant amount of capital to its shareholders through a $5 billion accelerated share-repurchase program.

In a separate transaction, Verizon also has agreed to lease the rights to over 11,300 of its company-owned wireless towers to American Tower Corporation, which will also purchase approximately 165 Verizon towers, for a total upfront payment of approximately $5 billion.

American Tower will have exclusive rights to lease and operate over 11,300 Verizon cell towers.

The average term of the lease rights is about 28 years. As the leases expire, American Tower will have fixed-price purchase options to acquire these towers based on their anticipated fair market values at the end of the lease terms.

Verizon will sublease capacity on the towers from American Tower for a minimum of 10 years for $1,900 per month per site, with annual rent increases of two percent. Verizon will have customary renewal options that could potentially extend the full term of the sublease to 50 years.

Earlier, I had estimated that “if Verizon acquires $10 billion worth of assets from Verizon Communications, and the value of a subscriber is about $3000, that implies the purchase of about 3.3 million subscribers. At $3200 per subscriber, the deal implies the purchase of about 3.13 million subscribers.”

The price actually wound up being about $2835, for a mix of consumer and small business accounts.