February 12, 2015
Verizon is making some big moves – namely by focusing on its wireless growth, East Coast landlines, and its FiOS business – providing valuable insight into the company’s future endeavors.
As of last week, Verizon Communications Inc. announced that it will sell its wireline assets in California, Texas and Florida to Frontier Communications. The company also plans to sell 165 wireless towers and lease the rights for another 11,300 towers to American Tower Corp.
The sum of these deals is expected to be about $15.6 billion (Verizon will gain $10.54 billion and $5 billion for its deals with Frontier and American Tower, respectively).
These proceeds will reportedly help the company finance the $10 billion-plus worth of airwaves it won early in February at a U.S. spectrum auction, as well as pay off debt – particularly from its $130 billion deal to acquire Vodafone’s 45 percent stake (see Verizon Leaves Vodafone Behind, Seeking More Independence) – and repurchase about $5 billion in stock.*
Currently, Frontier has access lines in 28 states with a multitude of voice, broadband and video services.
Upon completion of the deal in the first half of 2016 (pending regulatory approvals), Frontier will acquire about 11,000 Verizon employees in addition to the 8 million-plus customers subscribed to wireline in California, Texas and Florida.
According to Verizon, that includes about 3.7 million voice, 2.2 million high-speed data, 1.6 million FiOS Internet and 1.2 million FiOS Video customers (at the end of 2014). All of these customers will be included in the sale, as well as switched and special access lines, high-speed Internet service and long-distance voice accounts in the three states.†
This will leave Verizon with landline operations of 16.1 million phone connections, 7 million high-speed Internet lines and 4.5 million FiOS TV subscribers in nine East Coast states and Washington, D.C.*
The deal with American Tower is expected to close later this year, providing lease rights for some 11,300 towers for an average term of about 28 years.
As part of the deal, Verizon will then sublease capacity on the towers for a minimum of 10 years for $1,900 per month per site, with annual rent increases of 2 percent and renewal options on the towers for up to about 50 years.†
These deals are a clear push by Verizon to strengthen future business endeavors and solidify its past dominance in the wireless market (see Comparing Network Coverage in 2014).
The focus on wireless and East Coast wireline operations also show the services that Verizon perceives as its most valuable and promising services moving forward.
Ultimately, an increased focus on wireless likely means a better-quality network (especially as carriers improve network performance in 2015 overall), building upon Verizon’s previous efforts to improve its wireless network (see Verizon Aims to Expand 4G LTE with Q2 Spend).
* Moritz, Scott. Verizon Sells Landlines, Towers in 2 Deals for $15.6 Billion, Bloomberg Business. Bloomberg L.P.
† Weiss, Todd R. Verizon Sells Wireline Phone Operations in 3 States to Frontier, eWeek.com. QuinStreet Inc.