Verizon selling Washington state phone lines to Frontier

NEW YORK — Verizon Communications said today that it reached a deal to sell its phone lines in Washington state as well as other scattered phone service areas outside its main Northeastern and Californian territories for $5.3 billion in stock.

The buyer is Frontier Communications, a Stamford, Conn.-based company that focuses on serving small towns and rural areas and will triple in size with the deal.

Verizon, the second-largest local telephone line provider in Washington, has around 518,000 residential and business access lines north of Seattle and elsewhere across the state, said Washington Utilities and Transportation Commission (WUTC) spokeswoman Marilyn Meehan.

The WUTC will decide whether to approve the proposed acquisition based on the public interest, traditionally interpreted to mean the deal does no harm to ratepayers, she said.

The sale also includes all of Verizon's phone lines in Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, West Virginia and Wisconsin as well as some assets in border areas of California.

The deal continues Verizon's strategy of focusing on its core areas, where it is upgrading its phone lines to fiber optics, enabling it to offer TV service and faster Internet access. It sold off its phone lines in Maine, New Hampshire and Vermont for $2.3 billion last year to FairPoint Communications.

The agreement would give Frontier 4.8 million phone lines to residential and small business customers and 1 million broadband connections. Frontier currently has 2.3 million customers.

Analyst Christopher King at Stifel Nicolaus noted that buyers of Verizon phone lines have fared badly in the past — FairPoint is struggling with its debt load, and the buyer of Verizon's Hawaiian business has filed for bankruptcy protection. But King said Frontier will actually reduce its debt load relative to its earnings through the transaction.

FairPoint was beset by customer service problems after taking over the Verizon lines, and Sanford Bernstein analyst Craig Moffett said that would make it tougher for the Frontier-Verizon deal to pass muster with state regulators.

Two unions organizing more than 8,000 Verizon workers affected by the Frontier deal expressed "serious concerns," pointing to the problems that followed the FairPoint transaction. The International Brotherhood of Electrical Workers and the Communications Workers of America also questioned Frontier's ability to invest in broadband after assuming extra debt in the deal.

Maggie Wilderotter, Frontier's chief executive, said Frontier would have no problem taking over Verizon's lines, because they come complete with Verizon's billing systems.

Frontier will be taking over 110,000 subscribers to Verizon's FiOS fiber-optic Internet service and 69,000 TV customers. Wilderotter said Frontier will continue to build out FiOS in areas where Verizon has started, to satisfy local TV franchise agreements.

The roughly 11,000 workers that support the local landlines will move to Frontier with union contracts intact, Verizon said.

Information from the WUTC was reported by Seattle Times staff.