Frontier says that its pending acquisition of AT&T's (NYSE: T) Connecticut operations, which will close on Oct. 15 when it gets approval from Connecticut's Public Utilities Regulatory Authority (PURA), reflects its desire to seek out deals that scale its operations.
Speaking during the Bank of America Merrill Lynch 2014 Media, Communications and Entertainment Conference, John Jureller, CFO of Frontier, said that this acquisition enhances its subscriber and network reach in Connecticut.
"To date, our acquisition activity has been around increasing the scale of what we do," Jureller said. "We kind of like the scale deals because they involve businesses that we know well. We know the dynamics, we know what the customers look like, we know what the underlying operation issues are, and we know what the economics are."
By acquiring AT&T's Connecticut operations, Frontier will gain 900,000 voice customers, 415,000 broadband customers and 180,000 U-verse video subscribers. This June the service provider said it would extend U-verse service initially to an additional 100,000 customers.
When it comes to enhancing its services set with more specialized capabilities such as home monitoring or its new service that allows customers to send text messages using their existing phone numbers, the service provider has been focused on working with partners like Intuit, Zipwhip and Google.
That does not mean that Frontier is opposed to acquiring other companies with specific expertise, but the challenge relates to business lines that are outside of the scope of the traditional telecom operations and being able to properly manage them.
"There are plenty of opportunities out there to grow revenue, but the question is can we enterprise value," Jureller said. "Those businesses trade at different multiples, they have different margin profiles, they bring different capital requirements, but more importantly it is businesses we don't manage today."
Frontier is confident that it has the experience to integrate the AT&T Connecticut operations into its own fold. When it acquired Verizon's (NYSE: VZ) rural properties in 2010, it was able to cut over the West Virginia market on the first day.
However, the Connecticut acquisition isn't without its own unique complexities.
In August, the acquisition hit a snag when Connecticut's state Public Utilities Regulatory Authority (PURA) denied a settlement the telco reached with state officials.
Another new element that Frontier will take on when it does complete the purchase is it will have to run AT&T's existing U-verse video business.
"There's a more intensive part of the video business that we'll cut over," Jureller said. "We're going to be operating U-verse video for the first time. We operate FiOS video now so we'll have two video systems to operate going forward, but in the end the customer will have the same experience they have today."
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