Verizon Communications is casting off its plain, old telephone service in 14 states.
In its ongoing effort to focus on wireless and broadband, Verizon announced on Wednesday plans to sell 4.5 million landlines and related assets to Frontier Communications. The operations are based across 14 states, mostly tied to residential and small-business customers in rural areas.
"This transaction is part of our multiyear effort to transform our growth profile and asset base to focus on wireless, FiOS fiber-optic services and other broadband development, and global IP," said Ivan Seidenberg, chief executive officer of Verizon. "All of Verizon's remaining local landline operations have high concentrations of FiOS in more densely populated markets."
Verizon shareholders will be big beneficiaries. As part of the deal, Frontier will merge with a new company that will be spun off as common stock to Verizon investors. The transaction is expected to net Verizon and its stockholders a total value of $8.6 billion, according to Verizon.
The deal also stands to increase the size and foothold of Stamford Conn.-based Frontier. "With more than 7 million access lines in 27 states, we will be the largest pure rural communications provider of voice, broadband and video services in the U.S.," Frontier CEO Maggie Wilderotter said.
The transaction includes all of Verizon's landline assets in Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia, and Wisconsin, as well as some assets in California. Verizon expects the deal to be completed within 12 months.
The move is the latest in Verizon's efforts to shake up and refocus its operations. Earlier this week, Verizon said it will sell the wireless assets it picked up from Alltel, a requirement of its recent merger with Alltel. AT&T will pay Verizon $2.35 billion for the wireless licenses, subscribers, and other assets. In return, AT&T will sell Verizon its former Centennial wireless operations.