Verizon Communications has confirmed plans to sell part of its wireline assets to Frontier Communications for USD 10.54 billion. Frontier will acquire the local wireline operations serving customers in California, Florida and Texas for USD 9.9 billion in cash and USD 600 million in assumed debt.
The operations had at the end of 2014 3.7 million voice connections, 2.2 million high-speed data customers, including 1.6 million FiOS internet customers, and 1.2 million FiOS video customers. Around 11,000 Verizon employees will also transfer to Frontier. Verizon will hold on to its wireless and enterprise assets in the states and retain a wireline footprint in nine states in the northeast of the country.
Frontier said it has secured bridge financing for the deal. This will be refinanced with equity, equity-linked securities and debt. The acquired assets are expected to contribute USD 5.7 billion in annual sales as well as boost the company's free cash flow by 35 percent. Pending regulatory approval, the deal is expected to close in the first half of 2016.
In addition, Verizon has agreed to lease the rights to over 11,300 of its wireless towers to American Tower Corporation, which will also purchase approximately 165 Verizon towers, for a total upfront payment of USD 5 billion. This is a significant majority of the towers owned by Verizon.
The average term of the lease rights is about 28 years. When the leases expire, American Tower will have options to acquire the towers at fair market values. Verizon will sublease capacity on the towers for a minimum 10 years for USD 1,900 per month per site, with annual rent increases of 2 percent. Verizon will have customary renewal options that could potentially extend the full term of the sublease to 50 years. The transaction with ATC is expected to close mid-2015.
Part of the proceeds of the sales will be returned to shareholders in the form of a USD 5 billion accelerated share-repurchase programme. The programme starts 05 February and will be completed by Q2.
