AT&T announced plans to shed wireline assets in the Northeast as it focuses future growth opportunities on its wireless operations.
The telecom giant said it has agreed to sell its local exchange carrier operations in Connecticut to Frontier Communications for $2 billion in cash. The deal includes more than 900,000 voice connections, including U-verse voice over IP and traditional voice services delivered over access lines; approximately 415,000 broadband connections, including about 245,000 U-verse high-speed Internet and about 170,000 DSL customers; and about 180,000 U-verse video subscribers.
AT&T said it plans to use proceeds from the sale to fund its Project Velocity IP program that will see the company to expand services in IP, cloud and wireless. That program, which was announced late last year, includes investing more than $14 billion in broadband through 2015, with $8 billion of that slated for wireless and $6 billion for wireline infrastructure. AT&T earlier this year announced plans to sell off 9,700 towers to Crown Castle for $4.85 billion in a move to help fund the Project VIP program.
AT&T has also been rumored to be looking at purchasing European-based telecom giant Vodafone in a deal that would result in a super-carrier with a market capitalization in excess of $250 billion and serving in excess of 500 million customers around the world. However, analysts don’t think the Frontier deal is connected with those rumored plans.
AT&T continues to support wireline services, including its U-verse offering, in 21 states. Frontier has been working with AT&T through a wholesale agreement to offer wireless services to its customers.
“We will continue to invest in Connecticut to serve our wireless and business customers, will maintain a significant employee presence here and will continue to be involved in the community,” explained Patricia Jacobs, president of AT&T New England. “The fact that Frontier is headquartered in Connecticut will help ensure a smooth transition for customers and employees.”
The move bolsters Frontier’s wireline operations, which currently extend across 27 states. The company announced in 2009 plans to acquire Verizon Communications’ local wireline operations across 14 states for $8.6 billion, a deal that when it closed in mid-2010 made Frontier the largest pure rural telecommunications carrier in the United States.
“This looks like an attractive transaction for Frontier,” wrote Andrew Spinola, senior analyst at Wells Fargo Securities in a research note on the AT&T deal. “This is a significant transaction, but [Frontier] has experience with these types of transactions and should be well-positioned to manage the process. The transaction is also financially attractive as it improves the payout ratio, creates [$200 million] in synergy opportunities, and increases the scale of the business.”
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