US regional telco Frontier Communications (NASDAQ:FTR) has won FCC approval for its US$10.54bn acquisition of Verizon Communications’ (NYSE:VZ) wireline operations in California, Florida and Texas.
The deal, which has also been approved by the Department of Justice, still requires clearance from the public utilities commissions in California and Texas, however Frontier remains confident it will close in Q1 2016.
Frontier president and CEO Daniel McCarthy (pictured) said he is pleased the FCC completed a swift review, releasing a decision ahead of its internal deadline.
“The FCC views this transaction as being in the public interest and benefitting customers in the three acquired states,” he said. “We agree and believe it will further benefit those across the rest of the Frontier footprint as well. By doubling our size, we will add scale and scope to our operations, strengthen our product and service offerings and improve the customer experience.”
Verizon announced in February that it would sell wireline, broadband, fibre and video assets in the three states to Frontier so it could focus on its East Coast operations. The US$10.54bn price tag includes US$600m of assumed debt.
In a recent SEC filing, Frontier revealed that the wireline assets it is acquiring produced solid results in the second quarter. Revenues were up 40bps year-on-year to US$1.45bn, adjusted EBITDA was up 3.7% to US$416m and the adjusted EBITDA margin was up to 28.7% from 27.8%.
Wells Fargo analyst Jennifer Fritzsche said in an investor note that the “encouraging” results should allay fears about performance.
She noted that Verizon has committed to investing in its network until the deal closes and, during Q2, continued to spend about 10% of revenues (US$143m) on capex.
Frontier completed the equity component of the deal in June with a US$2.75bn dual-tranche offering. It has a bridge offering in place to fund the entire amount, but has said it preferred to use high-yield financing.
In mid-August, Frontier inked a US$1.5bn senior secured term loan, led by JP Morgan, to help fund the acquisition.
Fritzsche said it could not yet provide timing on the remaining US$6bn-plus of high-yield debt, but that the recent SEC filing signalled that it was now a step closer.
McCarthy said in the FCC approval statement that Frontier planned to extend high-speed broadband to an additional 750,000 homes across its entire footprint by the end of 2020.
In mid-June, the telco agreed to accept some US$283m in annual support from the FCC’s Connect America Fund to boost its broadband roll-out.