UPDATE In their joint filing this week seeking the FCC’s approval, Verizon (NYSE: VZ) and Frontier (NASDAQ: FYBR) say their planned transaction would be in the public interest, benefit Frontier customers and would not harm competition. Verizon plans to acquire Frontier for $38.50 per share plus acquired debt, which equates to about $20 billion, Inside Towers reported. The transaction would bring Frontier’s 7.2 million fiber passings and 2.2 million fiber subscribers into Verizon’s fiber footprint.
“Verizon possesses the financial standing and expertise necessary to optimize the Frontier network,” the companies say in the filing. “By leveraging its significant financial strength, capital resources, and unparalleled technology, tools, and training, Verizon will build on Frontier’s post-bankruptcy efforts to deliver better service, increase value, and offer more choice to current Frontier customers.”
Frontier says it’s the largest pure-play fiber provider in the U.S. With approximately 13,300 employees serving more than 3.1 million customers in 25 states as of December 31, 2023, Frontier says it currently owns and operates more than 50 incumbent local exchange carriers and a small number of competitive local exchange carriers. It generated revenues of approximately $5.8 billion in 2023.
But Frontier has a debt load of about $12 billion, plus interest of approximately $800 million (7 percent) per year on the debt balances outstanding in each period. The debt “may place a significant strain on Frontier’s ability to make additional investments in its network going forward. Specifically, its current debt level will impact Frontier’s ability to obtain additional debt or equity financing on favorable terms. This will make it harder for Frontier to keep investing in fiber at the level necessary to compete and meet the needs of its customers,” Frontier says in the filing.
Frontier says it also faces competition from a growing number of competitors, specifically cablecos. They’re not subject to the same level of regulation and have lower cost structures, allowing them to offer lower prices than Frontier, it asserts. It also notes that cablecos can bundle their service offerings in packages at competitive price points, and provide customers with “home broadband and mobile wireless service, which Frontier does not offer. Frontier’s lack of bundling mobile wireless service places it at a competitive disadvantage,” it says, noting that the Verizon deal would give it the ability to be competitive.
Frontier says it’s “well on its way” to completing its plan to build out its fiber network to 10 million homes by 2026. But it doesn’t have the money for more investment or more fiber builds beyond that.
Verizon asserts the acquisition would enable Frontier’s fiber network to be completed and expand consumer choices, including the availability of a low-income broadband plan and bundled service discounts.
Verizon says its companies generated revenues of $134 billion in 2023. If the $20 billion deal is approved, Verizon would acquire 100 percent of Frontier and its subsidiaries. “Frontier will be the surviving entity and will become a wholly owned, direct subsidiary of Verizon,” they state in their application. “Verizon and Frontier do not materially compete and have no plans to do so.”
“The transaction will allow Verizon to build on Frontier’s Building Gigabit America™ efforts and will result in substantial benefits for consumers beyond what Frontier would be able to provide by continuing as a standalone company. For these reasons, the Commission should expeditiously approve the transaction,” the telecoms state.
The joint application was filed simultaneously with the Wireline Competition Bureau and the Office of International Affairs.
By Leslie Stimson, Inside Towers Washington Bureau Chief
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