AT&T To Sell Connecticut Wireline Business To Frontier Communications For $2 Bln

(RTTNews) - Telecommunications giant AT&T Inc. (T) said Tuesday that it has agreed to sell its wireline residential and business services as well as associated assets in Connecticut to Frontier Communications Corp. (FTR) for $2 billion in cash.

AT&T will use part of the sales proceeds to transform its operations - through Project VIP - to an all-IP, wireless and cloud network.

Under the terms of the deal, AT&T will receive $2 billion in cash for the stock of its subsidiaries, The Southern New England Telephone Company and SNET America, Inc. The transaction includes wireline network assets as well as consumer, business and wholesale customer relationships.

Connecticut-based Frontier Communications provides communications services to residential and business customers across 27 states today. With the transaction, the company will now have operations to provide communications service to customers in the State of Connecticut.

Under the deal, Frontier Communications will acquire more than 900,000 voice connections, about 415,000 broadband connections and about 180,000 U-verse video subscribers of AT&T in Connecticut. The broadband connections being acquired by the company include about 245,000 U-verse High Speed Internet and about 170,000 DSL customers.

The transaction is subject to review by the U.S. Department of Justice, the Federal Communications Commission and the Connecticut Public Utilities Regulatory Authority as well as other state regulatory authorities. AT&T and Frontier Communications expect the transaction to close in the second half of 2014.

AT&T's 2,700 wireline employees supporting the company's operations in Connecticut will transfer with the business to Frontier Communications at the close of the transaction. Frontier Communications has agreed to honor the existing collective bargaining agreement for employees represented by the Communications Workers of America.

AT&T said it remains committed to having a significant presence in Connecticut, provide wireless service on its 4G LTE network and also provide networking, application solutions as well as professional services for Connecticut business customers.

With Project VIP, AT&T plans to expand its 4G LTE network to 300 million people across the U.S. In its remaining 21-state wireline service area, AT&T intends to expand U-verse high speed Internet and video services to more customer locations as well as deploy its fiber network to more business customer locations.

AT&T noted that the divested operations represent about $1.2 billion in annual revenues, or less than 1 percent of its total annual revenues, as of 2013. The company said the transaction will not affect its 2013 financial results. After the deal closes, financial impacts will be reflected in the company's guidance for future periods.

AT&T said it is currently evaluating the impact of this sale on its Project VIP projections, but does not expect significant changes.

Separately, Frontier Communications said that the AT&T business will be transferred to it on a debt-free basis. The company added that JPMorgan has committed the financing required to complete the transaction.

Frontier Communications expects to realize cost synergies and savings of $200 million annually on completion of the integration.

Frontier Communications expects the transaction to be accretive to its adjusted free cash flow per share in the first year, and also expects the transaction to improve its dividend payout ratio by more than 5 percentage points in the first year.

T closed Monday's trading at $34.15. In Tuesday's pre-market trades, the stock is adding $0.32 or 0.94 percent to $34.47.

FTR closed Monday's trading at $4.40. In Tuesday's pre-market trades, the stock is adding $0.35 or 7.95 percent to $4.75.