Fairpoint Comm. Drops on Rejection of Verizon Landline Sale

Shares of Fairpoint Communications (FRP), a provider of rural telephone service, fell 7.6% to $14.46 on Friday, after the Vermont state government rejected the company's proposed $2.7 billion purchase of landlines from Verizon (VZ). Verizon and Fairpoint announced the deal, which consists of 1.6 million landlines in Vermont, Maine and New Hampshire, nearly a year ago. The deal has also faced opposition from regulators in Maine (who recently proposed a $600M price reduction) and Verizon employees fearful of losing their jobs. The Vermont Public Service Board's decision doesn't terminate the deal, but it forces the companies to reach a new agreement, which could mean lowering the sale price. The Board was most concerned with Fairpoint taking on $2.5B in debt financing and its ability to deliver satisfactory customer service, as well as roll out technological improvements such as high-speed Internet, to its customers. Fairpoint claims it will generate $200M of annual free cash over the first five years post-deal and says it will be "seamless" to Vermont subscribers. Shares of Verizon gained 1.1% to $44.32 on Friday.

Sources: Press release, Associated Press, Bloomberg, Wall Street Journal
Additional Reading:

FairPoint Communications Q3 2007 Earnings Call Transcript • Verizon Q3 2007 Earnings Call Transcript

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