Verizon Sells Wireline Assets in 3 States to Frontier Communications

Analyzing Verizon’s 4Q14 Wireline Segment Results (Part 6 of 7)

(Continued from Part 5)

Verizon will sell its wireline assets in three states

Verizon (VZ) signed an agreement for the sale of its wireline assets in Florida, California, and Texas to Frontier Communications (FTR) on February 5, 2015. According to Frontier Communications, the transaction is worth ~$10.54 billion. The asset sale should complete by 1H16. However, this completion is subject to approval by regulatory agencies such as the FCC (Federal Communications Commission) and the DOJ (US Department of Justice).

Frontier continues to strengthen its wireline operations through acquisitions. In 2010, Frontier Communications bought the largely rural wireline assets of Verizon in 14 states. It also bought AT&T’s (T) Connecticut wireline assets in 2014.

The assets to be sold contribute significantly to Verizon’s wireline division

According to Frontier Communications, the company will gain ~7.1 million wireline connections and customers from Verizon in the three states from this transaction. These include ~3.7 million voice connections. These connections also include ~2.8 million FiOS Internet and video customers. According to Frontier Communications’ press release, FiOS is deployed in the majority of networks for these wireline assets. Also, Verizon had made capital investments larger than ~$7 billion in FiOS deployment in these wireline assets.

Verizon’s wireline assets in the three states contribute significantly to its overall wireline segment. According to the company, these assets generated revenues of ~$5.8 billion and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of ~$1.6 billion during 2014.

If you want to take on diversified exposure to Verizon, you can invest in the Technology Select Sector SPDR Fund (XLK). The ETF held ~5% in the company on March 19, 2015.

You can also take on more diversified exposure to the company by investing in the iShares Russell 1000 Growth ETF (IWF). The ETF held ~1.8% in Verizon on the same date.

Continue to Part 7

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