In $2.72B deal, FairPoint buying Maine, Vermont N.H. telephone business

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Verizon Communications Inc. is selling its residential telephone business in Maine, New Hampshire and Vermont to FairPoint Communications of North Carolina for $2.72 billion in a deal announced Tuesday.

In Maine, where FairPoint has about 50,000 customers and Verizon 400,000, the deal has to be approved by the Public Utilities Commission.

That process will take a year and include a public comment period.

“We have to make sure there’s no harm to consumers; that’s the standard we hold,” said PUC spokeswoman Nicole Clegg.

Company officials stressed a seamless transition.

“If you’re a current FairPoint customer, you will see absolutely no change in your service or your bill,” said Walt Leach, executive vice president of corporate development for FairPoint. Verizon customers, after merger approval, will notice the new name but “no price increases, no service changes.”

Verizon and FairPoint stressed no layoffs will occur as a result of the deal, and FairPoint will be assuming Verizon’s labor agreements. FairPoint also expects to hire 600 more employees in the three-state region.

“Later in this year, we’ll be talking about where they’re going to be and what they’re going to be,” FairPoint CEO Gene Johnson said in a conference call with reporters.

The operations being sold employ 3,300 workers, and roughly 3,000 of them will work for FairPoint after the deal. The remaining 300 employees will remain with Verizon, which is retaining the business-services operations in those states that were acquired with MCI.

Hoping to head off worries among local officials that Verizon’s planned exit might lead to deterioration in phone and Internet service, the companies emphasized that FairPoint would invest heavily in the region to expand broadband availability to more homes.

In the three states, better than 80 percent of FairPoint customers already have access to high-speed DSL lines versus only 62 percent of Verizon customers, according to Leach. Former Verizon customers’ access will improve “substantially” in the year after the merger, he said.

FairPoint plans to invest $200 million on infrastructure improvements and systems development in the region, with half of that amount being spent “even before we close the transaction,” said Johnson. The operations being acquired provide DSL Internet service to 180,000 customers.

Verizon’s local exchange assets in the three states will be transferred to entities owned by a newly created Verizon unit. That unit will incur $1.7 billion of new debt, be spun off to Verizon’s stockholders and immediately merged with and into FairPoint.

Of the $2.72 billion being paid by FairPoint in the deal, Verizon shareholders will receive about $1.02 billion in FairPoint stock. Verizon will receive $1.7 billion, consisting of both cash and an undisclosed portion of the debt securities issued prior to the spinoff.

FairPoint’s shares jumped more than 15 percent to a 52-week high of $21.50 after the deal was announced. The stock was up $2.88 at $21.42 in afternoon trading on the New York Stock Exchange. Verizon’s stock fell 17 cents to $37.16 on the NYSE.

The deal is expected to be completed within the next 12 months. Verizon will not own any shares in FairPoint after the transaction is completed.

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