Verizon-Frontier deal gets FCC approval

Frontier (NYSE: FTR) finally cleared the last regulatory hurdle in its bid to acquire Verizon's (NYSE: VZ) rural lines in 14 states as the FCC gave its official approval of the deal late last Friday.

The FCC decided to approve the deal because Frontier had agreed to a number of commitments that included, not surprisingly, increasing broadband availability to residential customers and to anchor institutions such as libraries, hospitals and government buildings in both ‘unserved' and ‘underserved' communities. On the consumer side, Frontier said it would enable at least 85 percent of its transferred lines to have 3 Mbps downstream capabilities by the end of 2013 and 4 Mbps downstream by the end of 2015.

FCC Chairman Julius Genachowski said in a statement that the "transaction should provide substantial public interest benefits, but it won't by itself solve broadband challenges in the areas to be transferred."  

Coming only a week after the West Virginia PSC approved the deal, Frontier will instantly triple its size and become the largest rural service provider when the deal finally closes in July.

To make transition work for both Frontier and its customer base, Frontier's biggest challenge will be in their ability to properly handle the OSS transition--an aspect that plagued FairPoint and Hawaiian Telecom's respective acquisitions of former Verizon lines.   

"Verizon's previous divestiture of rural lines, to FairPoint Communications, also came with requirements to build out broadband," said Ed Gubbins, Senior Analyst, NPRG. "What's most important, however--for customers in particular--is that Frontier handles the transfer of back-office systems successfully. Challenges in back-office system migration created horrendous problems related to billing, ordering and support when Verizon divested assets in New England and Hawaii. Getting that right is crucial for Frontier and its customers."

For more:
- see the release here
- Wall Street Journal has this article (subscription required)

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