Frontier Communications Corp. (FTR) announced that post-approval of its pending acquisition of AT&T Inc.’s (T) wireline operation in Connecticut, it plans to expand the reach of U-Verse in the region. Notably, U-Verse is a triple play communication service providing broadband, IP telephone and IPTV services.
Stamford-based Frontier initially plans to extend U-Verse service to 100,000 customers, in regions where U-Verse is currently present as well as those which it still does not cater to. However, the deal awaits the nod from Connecticut’s Public Utilities Regulatory Authority (PURA) and Federal Communication Commission. The carrier also confirmed that there will be no major changes in the U-Verse channel line that will be offered in the state. Frontier plans to close the deal by Oct 1, 2014.
In Dec 2013, Frontier had entered into a definitive agreement with AT&T to acquire the latter’s wireline assets in Connecticut for $2.0 billion in cash. The deal is expected to include the sale of 900,000 voice connections in Connecticut. This includes U-Verse Voice over IP and traditional voice services. In addition, AT&T will also provide Frontier with approximately 415,000 broadband connections in the region, which would incorporate 245,000 U-Verse and 70,000 DSL customers.
In addition, Frontier will also have access to AT&T’s 180,000 U-Verse video subscribers. Moreover, AT&T will transfer its 2,700 employees managing its Connecticut operations to Frontier as the deal closes.
Recently, Frontier moved closer to sealing the deal after the carrier and the communication workers of American District 1 (CWA.TO) Union agreed to a new labour contract. Frontier has agreed to extend the current collective bargaining agreement till 2018, which assures PURA’s concern about maintaining current employment level in the state.
Frontier also stressed that it will be easier for the company to integrate the AT&T assets compared to the wireline assets that the company acquired from Verizon Communications Inc. (VZ) in Jul 2010.
U-Verse has been a success story for AT&T as it generally carries a higher ARPU and a relatively low churn. We believe Frontier’s decision to expand the U-Verse service will boost its revenues through higher ARPU and subscriber additions.
Frontier currently carries a Zacks Rank #3 (Hold). Another stock worth considering within this sector is Cbeyond Inc. (CBEY), with a Zacks Rank #2 (Buy).