By John Poirier
WASHINGTON, May 21 (Reuters) - Verizon Communications Inc won final U.S. regulatory approval on Friday to sell 4.8 million rural phone lines to Frontier Communications Corp for about $5.25 billion in stock.
The Federal Communications Commission approved the transaction after receiving voluntary commitments from Frontier to increase broadband deployment and deploy high speed lines to anchor institutions such as libraries, hospitals and government buildings in unserved and underserved communities.
The deal, announced a year ago, will triple the size of Frontier, making it the largest rural-only service provider in the United States.
Frontier, which expects to close the deal on July 1, has said the transaction will boost earnings and provide $500 million of annual savings.
FCC approval was the final hurdle remaining, with the Department of Justice and all states requiring regulatory review having already cleared the deal.
Verizon has been shedding traditional home phone lines in markets it views as less strategic to focus on more-lucrative wireless customers and video services that compete with cable companies.
The FCC said Frontier's commitments would help advance the goals of the agency's National Broadband Plan by bringing high-speed Internet to millions of consumers, small businesses, and public institutions in 14 states.
'This transaction should provide substantial public interest benefits, but it won't by itself solve broadband challenges in the areas to be transferred,' FCC Chairman Julius Genachowski said in a statement.
Frontier has agreed to deploy high-speed Internet with speeds of at least 3 megabits per second (Mbps) downstream to at least 85 percent of transferred lines by the end of 2013, and increase the speed to at least 4 Mbps downstream by the end of 2015, the FCC said.
A speed of 4 Mbps would allow a customer to download a standard television show in about 12 minutes.
Frontier will offer speeds of at least 1 Mbps upstream for all new broadband deployment offerings, the FCC said. It also agreed to honor all obligations under Verizon's current wholesale arrangements to resellers that are in effect at closing.
Verizon shares closed up 0.7 percent at $27.96 on the New York Stock Exchange on Friday, while Frontier shares slipped 0.3 percent to finish at $7.71.
The deal comes amid a wave of consolidation in the rural phone market, as providers seek to cut costs as more consumers cancel landlines.
Last month, CenturyTel Inc said it plans to buy Qwest Communications International Inc in a $10.6 billion stock deal that would combine the third and fourth biggest U.S. landline phone companies to help them compete more aggressively and cut costs.
Other rural providers include Windstream Corp.
(Reporting by John Poirier; Editing by Tim Dobbyn) Keywords: FRONTIER VERIZON/FCC (john.poirier@thomsonreuters.com; +1 202 898 8399; Reuters Messaging: john.poirier.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, May 21 (Reuters) - Verizon Communications Inc won final U.S. regulatory approval on Friday to sell 4.8 million rural phone lines to Frontier Communications Corp for about $5.25 billion in stock.
The Federal Communications Commission approved the transaction after receiving voluntary commitments from Frontier to increase broadband deployment and deploy high speed lines to anchor institutions such as libraries, hospitals and government buildings in unserved and underserved communities.
The deal, announced a year ago, will triple the size of Frontier, making it the largest rural-only service provider in the United States.
Frontier, which expects to close the deal on July 1, has said the transaction will boost earnings and provide $500 million of annual savings.
FCC approval was the final hurdle remaining, with the Department of Justice and all states requiring regulatory review having already cleared the deal.
Verizon has been shedding traditional home phone lines in markets it views as less strategic to focus on more-lucrative wireless customers and video services that compete with cable companies.
The FCC said Frontier's commitments would help advance the goals of the agency's National Broadband Plan by bringing high-speed Internet to millions of consumers, small businesses, and public institutions in 14 states.
'This transaction should provide substantial public interest benefits, but it won't by itself solve broadband challenges in the areas to be transferred,' FCC Chairman Julius Genachowski said in a statement.
Frontier has agreed to deploy high-speed Internet with speeds of at least 3 megabits per second (Mbps) downstream to at least 85 percent of transferred lines by the end of 2013, and increase the speed to at least 4 Mbps downstream by the end of 2015, the FCC said.
A speed of 4 Mbps would allow a customer to download a standard television show in about 12 minutes.
Frontier will offer speeds of at least 1 Mbps upstream for all new broadband deployment offerings, the FCC said. It also agreed to honor all obligations under Verizon's current wholesale arrangements to resellers that are in effect at closing.
Verizon shares closed up 0.7 percent at $27.96 on the New York Stock Exchange on Friday, while Frontier shares slipped 0.3 percent to finish at $7.71.
The deal comes amid a wave of consolidation in the rural phone market, as providers seek to cut costs as more consumers cancel landlines.
Last month, CenturyTel Inc said it plans to buy Qwest Communications International Inc in a $10.6 billion stock deal that would combine the third and fourth biggest U.S. landline phone companies to help them compete more aggressively and cut costs.
Other rural providers include Windstream Corp.
(Reporting by John Poirier; Editing by Tim Dobbyn) Keywords: FRONTIER VERIZON/FCC (john.poirier@thomsonreuters.com; +1 202 898 8399; Reuters Messaging: john.poirier.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.