U.S. operator Verizon Communications has confirmed plans to sell its wireline business in 14 states to Connecticut-based Frontier Communications. The transaction, worth US $10.54 billion, is expected to close within 12 months and includes the sale of all of Verizon’s wireline assets in Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia and Wisconsin, as well as some wirelines in California. These assets give Frontier 4.8 million access lines, doubling its size and making it the largest regional communications provider of voice, broadband and video to rural markets and smaller cities in the U.S. Verizon is holding on to its wireless assets in those 14 states and will retain a landline presence in the Northeast. Additionally, Verizon plans to lease the rights to over 11,300 wireless towers to American Tower Corporation, which will also purchase approximately 165 Verizon towers, for a total payment of US $5 billion.
Verizon is in a tight race to remain the leader in the U.S. telecom market. These deals will give the operator cash to help pay off the US $130 billion debt it incurred from last year’s acquisition of Vodafone’s U.S. wireless assets, as well as to help defray the US $10.4 billion purchase cost of wireless licenses purchased at the U.S. federal spectrum auction that ended on 29 January. It could also be that Verizon is feeling some pressure, perhaps from aggressive price-cutting by some of the other major U.S. operators, perhaps from the recent announcement of Google’s interest in entering the MVNO business.
Verizon’s wireless business currently generates 70 percent of the company’s revenues. Verizon is clearly narrowing its focus to its core business: broadband, wireless and internet. It is of particular interest that the cell tower deal gives Verizon the flexibility to use towers only where they need to. As cell technology has evolved, fewer cell towers are needed to provide service. This has led to the use of a build-to-suit model in which rather than owning a portfolio of towers, a mobile operator instead leases space from a tower company that has built a tower specifically for it, located exactly where it is needed. AT&T and T-Mobile have generated sizable funds over the past 5 to 10 years by selling off their portfolios of towers and engaging in build-to-suit with multiple tower companies. It appears that in this case Verizon has decided to follow their example.