AT&T to sell Connecticut wireline business to Frontier Communications

AT&T will sell its Southern New England Telephone and SNET America, Inc. incumbent local exchange operations in Connecticut to Frontier Communications for $2.0 billion in cash, the two companies have announced. Frontier will own AT&T’s current wireline network assets and consumer, business and wholesale customer relationships in the state.

AT&T will retain its wireless operations in in Connecticut, as well as its networking, application solutions, and professional services for business customers.

“This is a good business decision for both companies, good for customers, and good for Connecticut,” said Patricia Jacobs, president of AT&T New England. “We will continue to invest in Connecticut to serve our wireless and business customers, will maintain a significant employee presence here, and will continue to be involved in the community. The fact that Frontier is headquartered in Connecticut will help ensure a smooth transition for customers and employees.”

About 2700 wireline employees that support AT&T’s operations in the state will transfer to Frontier. Frontier has agreed to honor the existing collective bargaining agreement for employees represented by the Communications Workers of America.

The Southern New England Telephone Co. and SNET America, Inc. currently oversee:

• More than 900,000 voice connections, including U-verse voice over IP and traditional voice services delivered over access lines.
• Approximately 415,000 broadband connections, including about 245,000 U-verse High Speed Internet and about 170,000 DSL customers.
• About 180,000 U-verse video subscribers.
  

The transaction is subject to review by the U.S. Department of Justice, the Federal Communications Commission, and the Connecticut Public Utilities Regulatory Authority and other state regulatory authorities. AT&T expects the transaction to close in the second half of 2014.

The divested operations represent about $1.2 billion in annual revenues, or less than 1% of AT&T’s total annual revenues, as of 2013. AT&T asserts the transaction will not affect 2013 financial results; after the deal closes, financial impacts will be reflected in guidance for future periods.

From the Frontier perspective, the transaction is estimated to be accretive to adjusted free cash flow per share in the first year. It also is expected to improve the company’s dividend payout ratio by more than 5 percentage points in the first year. Frontier believes it can realize cost synergies and savings of $200 million annually once integration is complete.

“We are excited to be acquiring AT&T’s wireline operating company in Connecticut, where our company has been headquartered since 1946. This is a great opportunity to bring to Connecticut Frontier’s portfolio of products and services, such as Frontier Secure, our industry leading digital security offering that gives customers top-rated online computer protection and premium technical support. It also allows us to introduce our local engagement management model to Connecticut in which Frontier employees provide high-quality service to their friends and neighbors and become actively involved in their communities,” said Maggie Wilderotter, Frontier’s chairman and CEO. “We see an opportunity to enhance broadband capabilities in Connecticut.”

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