form425.htm
Filed by
Frontier Communications Corporation
Pursuant
to Rule 425 under the Securities Act of 1933
and
Deemed Filed Pursuant to Rule 14a-12
Under the
Securities Exchange Act of 1934
Subject
Company: Frontier Communications Corporation
Commission
File No. 001-11001
The
following email message was sent by Maggie Wilderotter to all Frontier employees
on May 30, 2009:
Hi
everyone, the past 3 weeks have been very busy since we announced the
acquisition of 5Million access lines from Verizon. This is truly a
transformational transaction for our company and will give us stability and
scale to be viable in the long run. We know how to operate communications
services businesses in rural America. We are good at it and we can bring
our capabilities to these new markets. I believe we can right size these
markets by extending broadband to customers, bringing in our bundles and
improving the customer experience. This will enable us to grow revenues.
The competitive environment in these markets is better than our current
environment with less high speed and voice competition. The cable
competitors are the same as we have today – Time Warner, Comcast, Charter and
Mediacom – there are no Cox, Brighthouse or Cablevision markets in this new
footprint. We have a lot to do between now and closing – which we
anticipate will be 9-12 months from now.
Don
Shassian, our CFO and I have been meeting with investors explaining the deal and
the benefits to our current shareholders and Verizon shareholders. The
response has been positive as we talk about how we can bring the Frontier
marketing and local engagement model to these new markets. One of the key
questions we are getting from investors is why this transaction is different
from Fairpoint and Hawaii Telephone – since both of those acquisitions from
Verizon have been disappointing. I wanted to share our response as you all
might have the same question.
When
Ivan Seidenberg, the CEO of Verizon and I met to outline the key terms of this
transaction, we both committed to structure the deal so it would not have the
same issues as Fairpoint and Hawaii. There are 4 main
differences:
1.
This
transaction creates a strong balance sheet for Frontier approaching Investment
Grade right out of the gate. We will de-lever our debt from 3.8x EBIDTA
down to 2.6x at closing. With synergies, the leverage ratio is investment
grade. In addition, we are cutting our dividend by .25 cents to shift money from
our shareholders to invest for customers. Fairpoint and Hawaii both
increased their leverage with their Verizon transaction to OVER 4x’s which hurt
their financial flexibility and burdened them with high interest payments. In
addition, Fairpoint put in a large dividend at close which limited the amount of
money they could invest in integration and customer
products.
2.
These
markets that we are acquiring are rural and in our sweet spot. Hawaii is
definitely not a rural market and the Fairpoint markets in the North East are
seasonal with different demographics and activity than we have in our
markets.
3.
Frontier
has experience and is a large company doing business today in 24 states and 285
counties. Fairpoint only had 200,000 total customers and Hawaii was
purchased by a private equity company. Neither company had management,
processes, systems or experience to take on their acquired
properties.
4.
Frontier
has IT systems that are scalable to integrate all of these properties. The
only conversion we have to do at close is West Virginia which is just a little
larger than Commonwealth. The other 13 states we are acquiring come with
an entire suite of systems that we will own. These will run in parallel
with our existing Frontier systems and we will gradually convert those states
over to our systems in a 2-3 year window. This allows us to plan
conversions with minimal customer disruption. In addition, we have a lot of
billing conversion experience with our consolidation of billing systems over the
past 4 years. We have done 5 conversions. We also purchased GTE
properties in 1999 and successfully converted those markets on to our systems at
that time. Both Fairpoint and Hawaii Telephone had NO SCALABLE SYSTEMS and
had to build all systems from scratch. It continues to be challenging for
both of those companies as the systems they built did not work
correctly.
In
addition to investor meetings, Dan McCarthy, our Chief Operating Officer, Steve
Crosby, our SVP of Regulatory and Ken Mason, VP of Regulatory have been busy
meeting with regulators. We only need approval in 9 of the 27 states so we
will be focusing on those states as our priority. We do business in 7 of
these states today – only Washington and South Carolina are new states for us
where we need approval. Meetings have been held with all of the key
Commissioners in West Virginia, Ohio, Illinois, Indiana, Oregon and Arizona.
The response has been very positive as we explain to these Commissions how
Frontier will focus on customers in these markets – bringing new product bundles
and broadband to these communities. We have also emphasized our local
engagement and our active community involvement. We will meet with the
rest of the states over the next few weeks. Dan and his regulatory team
also spent several days on Capital Hill meeting with members of Congress from
all 14 states where we are acquiring customers. Regulatory and SEC filings
will be completed the first part of June.
In
addition to my basic business updates, I will continue to keep you updated on
our progress in getting our Verizon transaction approved and the integration
planning. Again, thank you for all you do for Frontier and our customers –
every day. It really does make a difference.
Best,
Maggie
Maggie
Wilderotter
Chairman
and CEO
Frontier
Communications
3 High
Ridge Park
Stamford,
CT 06905
I can help you!
Forward-Looking
Language
This
communication contains forward-looking statements that are made pursuant to the
safe harbor provisions of The Private Securities Litigation Reform Act of
1995. These statements speak only as of the date of this
communication and are made on the basis of management’s views and assumptions
regarding future events and business performance. Words such as
“believe,” “anticipate,” “expect” and similar expressions are intended to
identify forward-looking statements. Forward-looking statements
(including oral representations) involve risks and uncertainties that may cause
actual results to differ materially from any future results, performance or
achievements expressed or implied by such statements. These risks and
uncertainties are based on a number of factors, including but not limited to:
our ability to complete the acquisition of access lines from Verizon; our
ability to successfully integrate the Verizon operations and to realize the
synergies from the acquisition; failure to obtain, delays in obtaining or
adverse conditions contained in any required regulatory approvals for the
merger; the failure to obtain our stockholders’ approval; the receipt of an IRS
ruing approving the tax-free status of the transaction; reductions in the number
of our access lines and high-speed internet subscribers; the effects of
competition from cable, wireless and other wireline carriers (through voice over
internet protocol (VOIP) or otherwise); reductions in switched access revenues
as a result of regulation, competition and/or technology substitutions; the
effects of greater than anticipated competition requiring new pricing, marketing
strategies or new product offerings and the risk that we will not respond on a
timely or profitable basis; the effects of changes in both general and local
economic conditions on the markets we serve, which can impact demand for our
products and services, customer purchasing decisions, collectability of revenue
and required levels of capital expenditures related to new construction of
residences and businesses; our ability to effectively manage service quality;
our ability to successfully introduce new product offerings, including our
ability to offer bundled service packages on terms that are both profitable to
us and attractive to our customers; our ability to sell enhanced and data
services in order to offset ongoing declines in revenue from local services,
switched access services and subsidies; changes in accounting policies or
practices adopted voluntarily or as required by generally accepted accounting
principles or regulators; the effects of ongoing changes in the regulation of
the communications industry as a result of federal and state legislation and
regulation, including potential changes in state rate of return limitations on
our earnings, access charges and subsidy payments, and regulatory network
upgrade and reliability requirements; our ability to effectively manage our
operations, operating expenses and capital expenditures, to pay dividends and to
reduce or refinance our debt; adverse changes in the credit markets and/or in
the ratings given to our debt securities by nationally accredited ratings
organizations, which could limit or restrict the availability, and/or increase
the cost, of financing; the effects of bankruptcies and home foreclosures, which
could result in increased bad debts; the effects of technological changes and
competition on our capital expenditures and product and service offerings,
including the lack of assurance that our ongoing network improvements will be
sufficient to meet or exceed the capabilities and quality of competing networks;
the effects of increased medical, retiree and pension expenses and related
funding requirements; changes in income tax rates, tax laws, regulations or
rulings, and/or federal or state tax assessments; further declines in the value
of our pension plan assets, which could require us to make contributions to the
pension plan beginning in 2010, at the earliest; the effects of state regulatory
cash management policies on our ability to transfer cash among our subsidiaries
and to the parent company; our ability to successfully renegotiate union
contracts expiring in 2009 and thereafter; our ability to pay dividends in
respect of our common shares, which may be affected by our cash flow from
operations, amount of capital expenditures, debt service requirements, cash paid
for income taxes (which will increase in 2009) and our liquidity; the effects of
increased cash taxes in 2009 and thereafter; the effects of any unfavorable
outcome with respect to any of our current or future legal, governmental, or
regulatory proceedings, audits or disputes; the possible impact of adverse
changes in political or other external factors over which we have no control;
and the effects of hurricanes, ice storms or other severe
weather. These and other uncertainties related to our business are
described in greater detail in our filings with the Securities and Exchange
Commission (SEC), including our reports on Forms 10-K and 10-Q. There
also can be no assurance that the proposed transaction will in fact be
consummated. We undertake no obligation to publicly update or revise
any forward-looking statement or to make any other forward-looking statements,
whether as a result of new information, future events or otherwise unless
required to do so by securities laws.
Additional
Information and Where to Find it
This
communication is not a substitute for the prospectus/proxy statement Frontier
will file with the SEC. We urge investors to read the
prospectus/proxy statement, which will contain important information, including
detailed risk factors, when it becomes available. The
prospectus/proxy statement and other documents which will be filed by Frontier
with the SEC will be available free of charge at the SEC’s website, www.sec.gov, or by
directing a request when such a filing is made to Frontier, 3 High Ridge Park,
Stamford, CT 06905-1390, Attention: Investor Relations.
This
communication shall not constitute an offer to sell or the solicitation of an
offer to buy securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such
jurisdiction.
Frontier
and certain of its directors, executive officers and other members of management
and employees may, under SEC rules, be deemed to be “participants” in the
solicitation of proxies in connection with the proposed
transactions. Information about the directors and executive officers
of Frontier is set forth in the proxy statement for Frontier’s 2009 annual
meeting of stockholders filed with the SEC on April 6,
2009.