NASUCA Says Verizon Should Have to Guarantee Financing of Frontier Deal
The National Association of State Utility Consumer Advocates asked the FCC to impose an additional financial condition on Verizon’s proposal to sell 4.8 million access lines in 14 states to Frontier. The deal would triple Frontier’s size. NASUCA asked the commission to also require Verizon to provide the $3.1 billion in financing that Frontier has identified as needed to complete the transaction.
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“In this proceeding and in state proceedings, numerous parties have raised concerns about the heavy debt burden if this transaction is approved,” NASUCA said. “Verizon’s track record with other spin-off transactions has lead to the acquiring companies filing for bankruptcy. This was the case for the sale of Verizon Hawaii’s landlines to the Carlyle Group, the sale of its directory and yellow pages to IdeaArc, and the sale of its landlines in Maine, Vermont and New Hampshire to FairPoint Communications.”
In each of those transactions Verizon bore no financial burden if the other company failed, NASUCA said. “Requiring Verizon to provide the $3.1 billion needed for the financing of this transaction will ensure that Verizon has financial incentives to monitor and work with Frontier to ensure the transaction is ultimately successful.” NASUCA asked the commission to require Verizon to provide the financing at a rate “not to exceed 6.35% or the lower of any rate offered to any operating unit (including affiliates) by its internal financing group in the prior two years based upon a maturity date of 2019.”
Verizon and Frontier officials couldn’t be reached for comment. One industry source said the requirement would be unprecedented: “Commission precedent is it doesn’t look to restructure deals.”
Verizon and Frontier made three filings late last week in the FCC docket on the deal. In one filing, the companies answered various questions on the agreement that had been posed by the commission. They reported that as of July, Frontier nationwide passed about 13,861 homes with fiber-to- the-home service and provided in 38 wire centers in nine states. They also provided summaries of households in wire centers without any cable modem service and of households with at least one cable company offering cable modem service, a total of 5.1 million. The companies also asked for heightened or “second level” protection of several categories of highly sensitive competitive information requested by the commission, including on the financial model used to evaluate the impact of the transaction on Frontier’s revenue and cash flow and on access line loss. “In both these cases, the information the Applicants seek to guard through a second- level protective order would provide competitors and other third parties with a significant unfair and unwarranted advantage if they were to come to possess it and would harm Frontier’s ability to compete and operate its business effectively,” they said.
Verizon and Frontier representatives also reported on meetings with various FCC officials. “The parties provided a summary of the state proceedings in states where the transaction requires state regulatory action,” they said. “Three state commissions - California, Nevada, and South Carolina - have already approved the transfer of control of lines from Verizon to Frontier,” said an ex parte letter on the meetings. “Two other states, North Carolina and Pennsylvania, have granted the authorizations needed to separate Verizon properties being transferred to Frontier from those that are not.” Settlements are pending in Oregon, Ohio and Arizona, they said. The deal requires approval by the Justice Department, the FCC, 10 of the 16 states and local franchise license transfer authorities.