Frontier/Verizon Gets West Virginia Approval
West Virginia’s Public Service Commission conditionally approved Verizon’s proposed sale of landlines and long-distance accounts in that state to Frontier Communications. The announcement late Thursday marked the final assent needed at the state level for the transaction and came after a harsh campaign against approval by telecom unions. The only regulatory hurdle remaining is the FCC, which a Frontier official said might come within a week.
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"While any merger carries some level of risk, the Commission concluded that the benefits presented by this proposed merger, with conditions and commitments, outweigh the negatives or potential risk,” the West Virginia agency said. “The Commission believes that Frontier will emerge as a successful telecommunications utility company to serve West Virginia.” Verizon West Virginia President Keith Fulton is pleased at approval, he said. “The record developed in this case provides comprehensive evidence and assurances that the transaction with Frontier Communications is in the public interest and will provide many benefits to West Virginia residents, including increased investment and broadband availability in the state, while protecting jobs and promoting employment."
The commission’s conditions don’t faze Frontier, company spokesman Steve Crosby said, likening them to stipulations made earlier by other states. “We in effect agreed to these conditions months ago,” he said. “The delay by the unions was for naught. What we propose is good for customers and jobs and will bring West Virginia the broadband it has needed and wanted for years. Our folks are excited and looking forward to getting to work there."
Crosby expressed optimism that West Virginia’s approval might spur an FCC decision on the proposed merger in as soon as a week’s time. He said the transaction won’t be affected by a recent West Virginia commission order that Verizon put $72.4 million into an escrow account to cover service quality improvements (CD May 12 p14). “That’s separate from our deal,” Crosby said. “Verizon posts that money. We'll have to see how that plan is implemented, but that’s Verizon’s $72.4 million.”
Among conditions stipulated by the commission in granting its approval, Frontier must honor all existing Verizon obligations, including a retail quality service plan already in effect and approved by the regulator to continue through at least July 2, 2011. Frontier must make capital investments in its new West Virginia holdings of $30 million during the second half of 2010, $75 million -- including $12 million targeted at service quality -- in 2011, $63 million in 2012 and $63 million in 2013.
The commission also demanded that Frontier put at least $48 million in additional capital into expanding broadband deployment and subscription in the Verizon service territory. Frontier also must expand broadband availability in Verizon service areas “so that by no later than the end of the fourth year following the close of the sale, access to broadband service will be available to no less than 85 percent of the households within Verizon service areas,” the commission said.
Upon closing the deal, Frontier must locate a regional headquarters in Charleston, West Virginia’s capital. “Charleston will be Frontier’s Southeastern regional headquarters, and will be a major employment center for Frontier in the region,” the commission said. “It will be the hub for engineering, technical, operation and executive personnel for Frontier’s operations in West Virginia, Tennessee, North Carolina, South Carolina, Mississippi, Alabama, Georgia and Florida."
The regulator ordered that for a year after closing, Frontier adopt all Verizon tariffs, price lists and contracts, including long distance, under the same terms and conditions at closing, and cap all rates regulated by the commission. Another condition requires that Frontier provide the E-911 functionality Verizon has been providing. For 90 days after closing, Frontier is to waive early termination fees for current Verizon customers participating in a Verizon bundled service package. Verizon is to fund the pension account for employees moving to Frontier, and to remain responsible for employees who have retired prior to closing.