Verizon and Frontier File Public Interest Statement on Proposed Deal

Verizon and Frontier announced a $20 billion all-cash deal in September, hoping for completion within 18 months (see 2409050010). More than half that figure will pay off Frontier’s debt. Shareholders vote Nov. 13.

“Verizon possesses the financial standing and expertise necessary to optimize the Frontier network,” the statement argues: “By leveraging its significant financial strength, capital resources, and unparalleled technology, tools, and training, Verizon will build on Frontier’s post-bankruptcy efforts to deliver better service, increase value, and offer more choice to current Frontier customers.” After the deal closes, “current Frontier customers will have the opportunity to access the various offerings and substantial benefits that Verizon customers receive today.”

Verizon is a national brand but understands “being present in and understanding the local communities it serves is a key to being a top provider,” the statement says. Verizon commits to “promoting education, small businesses, public safety, and cutting-edge new technologies” in the communities served.

The filing argues that Frontier may lack the financial resources to complete its plan to pass 10 million locations with fiber. “From 2021 through June 2024, Frontier has invested $4.1 billion upgrading and expanding its fiber network and will need to expend more in 2025 and 2026 to complete its plans,” the statement says: As of June 30, "Frontier had debt of approximately $12 billion, of which approximately $11 billion was secured. In 2027, $1.35 billion of debt comes due, and debt maturities then increase to $3.64 billion in 2028 and average $2.2 billion per year thereafter through 2031.” In addition to principal payments, Frontier faces interest expense of some $800 million annually. “These debt obligations may place a significant strain on Frontier’s ability to make additional investments in its network going forward.”

Frontier also faces growing competitive pressures. These competitors are often “better resourced, have stronger brand recognition, and provide more service offerings than Frontier,” it says. “Many of Frontier’s competitors are not subject to the same level of regulation and have lower cost structures, which allows them to offer lower prices than Frontier for extended periods of time.” The public interest statement describes in detail other advantages Verizon offers Frontier customers. “Verizon is managerially, technically, and financially well-qualified to complete the acquisition, assume ownership and control of the Licensees, and operate Frontier’s network.”

Meanwhile, Reuters reported this week that some of Frontier’s largest shareholders believe Verizon's $38.50 per share offer is too low. One shareholder, Australia’s Cooper Investors, said in a public letter Tuesday the stand-alone value of Frontier is “as much as 62% higher than Verizon's offer price and … the fair transaction value would be up to 94% higher.”