US incumbent AT&T is selling its fixed-line business in Connecticut to triple play operator Frontier Communications for US$2bn.
JP Morgan has committed to provide Frontier with a US$1.9bn unsecured bridge loan facility to fund the all-cash deal.
The…
US incumbent AT&T is selling its fixed-line business in Connecticut to triple play operator Frontier Communications for US$2bn.
JP Morgan has committed to provide Frontier with a US$1.9bn unsecured bridge loan facility to fund the all-cash deal.
The buyer is acquiring AT&T’s traditional fixed-line and fibre optic networks in the state, along with its customers. Frontier said it expected to achieve US$200m in annual synergies and cost savings.
AT&T said it would use part of the proceeds for network upgrades to its 4G wireless network and other fixed-line units, spread over 21 states.
Yesterday AT&T closed the US$4.83bn disposal of towers to Crown Castle. The Dallas-based telco is widely reported to be looking at opportunities in Europe and has consistently been linked with a takeover offer for Vodafone Group, but has not said it is amassing a war chest for acquisitions.
The transaction requires the approval of the Department of Justice, the Federal Communications Commission, and a number of state bodies in Connecticut. The telcos expect the deal to close in the second half of 2014.
JP Morgan acted as financial adviser to Frontier and Lazard was mandated as the financial adviser to the independent members of Frontier’s board.
Skadden, Arps, Slate, Meagher & Flom and Kilpatrick Townsend & Stockton were legal advisers to Frontier.
In a note Credit Suisse analyst Joseph Mastrogiovanni said he felt the deal was positive for AT&T as it helped it with network upgrades, and added that the transaction did not signal “any change in AT&T’s view on Europe, nor the likelihood of a large acquisition there”.
In a memo to investors Wells Fargo analyst Jennifer Fritzsche felt the deal was also good for Frontier.
“This is a significant transaction, but Frontier has experience with these types of transactions and should be well-positioned to manage the process,” she said.
“The transaction is also financially attractive as it improves the payout ratio, creates US$200m in synergy opportunities, and increases the scale of the business.”
Frontier specialises in offering bundled triple play services to both residential and business customers in rural areas. The company has around four million customers across 27 US states – prior to this deal – and provides satellite DTH services via Dish Network and DirecTV.
At the end of 2012, Frontier had approximately US$8.38bn in long-term total debt. It generated US$5bn in revenues last year.
