Frontier's dream of becoming the largest U.S. tier 2 telco may have hit a snag as regulatory staffers in both Oregon and Washington state think that the utility commissioners in both states should not approve the rural operator's acquisition of Verizon's lines. The ILEC's deal to acquire Verizon rural lines in 14 states would increase Frontier's size by 3X while adding $3 billion to the company's debt--a key concern amongst regulators.
If the deal does go through, Frontier would acquire Verizon's operations in Oregon's suburban and rural areas. Portland, Oregon's cable regulators are worried that Frontier does not have the requisite knowledge to run Verizon's Fiber to the Premises (FTTP)-based FiOS TV and Internet service. Similarly, Washington state regulators also cited concerns over the amount of debt Frontier was taking on and if the acquisition would bring 'measurable benefits to customers.'
Regardless of the regulators' initial concerns, Frontier, which just won regulatory approval in an additional three states, argues that they will be more attentive to customer needs in both Washington and Oregon than Verizon has.
Casting a dark cloud over the Frontier's pending deal are the struggles that FairPoint Communications has had in taking over Verizon's New England lines. Ongoing billing and operations issues drove the company to file for Chapter 11 bankruptcy protection.
Despite the gloomy outlook, one analyst thinks that Frontier's acquisition of Verizon lines won't be another FairPoint. "Nobody wants to see that happen in their state," said Donna Jaegers, an investment analyst at D.A. Davidson. Jaegers added that unlike FairPoint, Frontier has a longer track record in conducting big acquisitions and a stronger financial footing.
- The Oregonian has this article
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