Frontier Communications’ (FTR) impending acquisition of the rural fixed-line business of Verizon (VZ) continues to face strong resistance, as the deal has been opposed by the workers’ unions of West Virginia.
Nearly 50 members and leaders of Communications Workers of America (“CWA”) have protested the asset sale in West Virginia at the FCC headquarters in Washington D.C.
The CWA fears that the transaction is detrimental to the state’s interest and may put Frontier in a severe financial crunch by elevating the carrier’s debt level. Moreover, the acquisition of Verizon’s assets should result in higher prices and degradation in service quality as Frontier lacks the requisite knowledge to operate Verizon’s coveted FiOS network.
Additionally, CWA stated that Frontier’s recent commitment to offer broadband speeds of 1-3 megabits per second (Mbps) not only fall below the FCC’s minimum target of 4 Mbps, but also the 50 Mbps goal set for 2015 to serve roughly 100 million households. Besides, the divestiture would constrict investment in broadband network infrastructure in West Virginia.
The deal suffered a major blow in March 2010 as an Administrative Law Judge in Illinois issued an order to block the transaction in the state. The concerned judge proposed to the state regulator “Illinois Commerce Commission” not to approve the deal. However, a final decision of the state regulator is expected in April 2010, which could amend or accept the judge’s proposal.
Frontier signed a deal to acquire Verizon’s regional wireline assets in May 2009. Verizon is divesting its fixed-line business (involving 4.8 million access lines) in 14 states to Frontier for roughly $8.6 billion. The deal was approved by the Frontier shareholders in October 2009 and was also cleared by the state authorities of California, Nevada, South Carolina, Arizona, Ohio and Oregon.
The transaction is now subject to the approval of the FCC and regulators in four other states (including Illinois and West Virginia) and is expected to close during second-quarter 2010.
The deal represents a major opportunity for Frontier as it contends with the loss of legacy landline phone business to wireless and competitive services of cable operators including Time Warner Cable (TWC). Frontier continues to face declining revenues which is, to a great extent, attributable to persistent erosion of fixed-access lines.
Successful completion of the deal would make Frontier the largest pure-play rural telecom operator with over 7 million access lines in 27 states. Additionally, this would unlock opportunities for revenue growth through expanded broadband penetration, attractive bundled service offerings and improved customer retention.
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