Verizon is selling its wireline phone operations in California, Texas and Florida to Frontier Communications for $10.54 billion as the company moves to bolster its core wireless and East Coast wired markets, as well as its FiOS business.
In a related deal, Verizon is also selling about 165 Verizon-owned wireless towers and leasing wireless tower rights for another 11,300 towers to American Tower Corp. for about $5 billion.
"Our long-standing strategy has been to consistently invest in our networks, improve our customers' experience, and develop new products and services while delivering profitable growth," Lowell McAdam, chairman and CEO of Verizon, said in a Feb. 5 statement. "These transactions will further strengthen Verizon's focus on extending our industry leadership position in our core markets and return significant value to our shareholders."
Frontier currently has access lines in 28 states, providing an array of voice, broadband and video services, including landline assets purchased from Verizon in 2009-2010, according to Verizon.
The deal with Frontier is expected to be completed in the first half of 2016 following regulatory approvals. About 11,000 Verizon company employees are expected to continue employment with Frontier after the transaction, according to Verizon.
"These properties align with Frontier's disciplined strategic focus and enhance our footprint with rich fiber-based assets," Maggie Wilderotter, Frontier's chairman and CEO, said in a statement. "We look forward to building on the strong results Verizon has delivered in these three states. Frontier has a solid track record of successful integrations, and we welcome the new employees who will help us implement our local engagement model in these markets."
The deal will give Frontier all of Verizon's local wireline operating territories in California, Florida and Texas, which at the end of 2014 served about 3.7 million voice customers, 2.2 million high-speed data customers, 1.6 million FiOS Internet customers and 1.2 million FiOS Video customers, according to Verizon. The sale includes those Verizon FiOS Internet and Video customers, switched and special access lines, as well as its high-speed Internet service and long-distance voice accounts in the three states.
The separate wireless tower deal with American Tower will provide lease rights for some 11,300 towers for an average term of about 28 years, according to Verizon. As part of the deal, Verizon will then 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 2 percent. Verizon will have renewal options on the towers for up to about 50 years. The tower deal is expected to close in mid-2015.
A Feb. 5 report by Bloomberg Business said the asset sales will help Verizon pay for the more than $10 billion of airwaves it won earlier in February through the government's radio spectrum auction.
In January, Verizon reported a loss of $2.2 billion in the fourth quarter of 2014, while adding 2 million wireless customers. The loss was largely due to the cost of non-operational expenses including benefits and pension payments, the company stated. Verizon brought in revenue of $33.2 billion for the period, which was a 6.8 percent increase over the year-ago quarter, when revenue came in at $31.07 billion. Verizon is the largest wireless carrier in the United States.
The $2.2 billion fourth-quarter loss was a $9 billion shift from one year ago, when the company posted $7.9 billion in profits for that quarter, according to the company's figures. Per-share loss for the quarter was 54 cents, compared with a $1.77 gain per share in the same quarter one year ago. The quarterly per-share loss was caused primarily by "significant non-operational items primarily related to the annual actuarial valuation of benefit plans and mark-to-market pension adjustments," the company stated in its report.