Frontier Moves Closer to Completing $2 Billion AT&T Acquisition

**Editor’s Note: Please click here for a recap of the biggest communications mergers in Q3 2014.**

Frontier Communications Corp., the nation’s sixth-largest local phone company, this week moved close to completing its $2 billion acquisition of AT&T’s wireline business in Connecticut.

The state Public Utilities Regulatory Authority (PURA) tentatively approved the deal, which will make Connecticut Frontier’s largest market comprising roughly 20 percent of the company’s customer base.

Steve Crosby, a Frontier spokesman, said the acquisition is expected to close at the end of October provided PURA approves it in a final order later this month. 

The U.S. Justice Department and Federal Communications Commission have previously approved the acquisition, and Frontier announced a settlement agreement in August with the Connecticut Attorney General and Office of Consumer Counsel in connection with the $2 billion deal. In a draft decision, PURA approved the acquisition and accepted the settlement agreement.

In December, Stamford, Connecticut-based Frontier announced an agreement to acquire AT&T’s wireline business and statewide fiber network in The Constitution State. Frontier, which operates in 27 states and has been based in Connecticut since 1946, is picking up 900,000 local access lines, 415,000 broadband customers and 180,000 video customers, according to the FCC, which found the agreement would serve “the public interest, convenience and necessity.” Of the 900,000 access lines, 60 percent are residential switched and VoIP while 40 percent are business customers, PURA said.

AT&T is not selling its wireless or enterprise businesses, and the Dallas-based telecom giant will continue to operate as a competitive local exchange carrier (CLEC), according to regulators. The FCC said the agreement wasn’t likely to adversely impact competition because Frontier and AT&T don’t compete against each other in the areas that are subject to the acquisition. Citing AT&T’s CLEC operations, the FCC found competition may actually increase after the acquisition is completed.

Under the agreement with the state Attorney General, for 36 months after the deal closes, Frontier has agreed to freeze basic primary residential rates and offer basic broadband at or below current prices where it is available. Frontier offers basic broadband service for $19.99 when it is bundled with voice, according to the FCC.

In connection with the acquisition, Frontier has pledged that within three years it will expand 10 Mbps broadband service to 100,000 additional homes where such speeds aren’t currently available. The company also said it would build a so-called middle mile fiber network connecting central offices across the state, an investment that will boost network capacity 10-fold and enable Frontier to provide 10 Gigabit broadband service to customers, the FCC said.

Under the terms of the acquisition, Frontier will purchase AT&T’s issued and outstanding capital stock of The Southern New England Telephone Company (SNET). Although the deal will add $1.9 billion in new debt to Frontier’s balance sheet, the company anticipates realizing savings of around $200 million.

As of June 30, 2014, Frontier served 2.76 million residential customers, 264,200 business customers, 1.93 million broadband customers and 393,900 video customers. Through the first six months of 2014, the company posted a net loss of $77 million on revenues of $2.3 billion.

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