Filed by Frontier
Communications Corporation
Pursuant to Rule
425 under the Securities Act of 1933
Under the
Securities Exchange Act of 1934
Subject Company:
Frontier Communications Corporation
Registration
Statement No. 333-160789
The following
article first appeared on Bloomberg News on November 4, 2009.
Frontier
Chief Says Verizon Assets to Be Integrated by 2012
By
Siddhartha Vaidyanathan
November
4, 2009
Frontier
Communications Corp., the phone company that’s tripling its size by buying lines
from Verizon Communications Inc., plans to complete most of the integration by
2012, its chief executive officer said.
The deal, unveiled
in May, is progressing as planned and should close in the second quarter,
CEO Maggie Wilderotter said in an interview yesterday at Bloomberg headquarters
in New York. The purchase
should pass regulatory hurdles and may help boost Frontier’s debt rating
to investment grade by 2012, she said.
Frontier plans to
cut jobs, combine the companies’ systems and remove overlapping functions to
improve profitability, Wilderotter said. The company also aims to lure more
high-speed Internet customers in states such as Arizona, Idaho and Oregon.
Frontier’s sales have fallen for six straight quarters as customers drop home
lines in favor of mobile phones.
“One of the things
that excites me the most about this transaction is our ability to grow revenues
in this market,” said Wilderotter, 54.
Combining the two
companies’ cultures may be the biggest task Frontier is facing, Wilderotter
said. Frontier, based in Stamford, Connecticut, is adding more than 10,000
employees in the transaction, bringing the total to about 16,000. Wilderotter
said she wants to drive a “cultural shift into Verizon” to make it more
“customer-centric at the local level.”
Job
Cuts
The transaction,
worth about $8.6 billion, adds about 4.8 million rural lines in 14 states and
triples Frontier’s annual sales to about $6.5 billion. Frontier is targeting
cost savings of $500 million a year.
Job cuts at both
Frontier and Verizon will create some of that, Wilderotter said, declining to
say how many positions will be reduced. Customer-service and field-technician
jobs won’t be eliminated, she said.
Frontier doesn’t
expect difficulties in combining the companies’ billing, information and other
systems, said David Whitehouse, the company’s treasurer.
“We’re not like
some prior telecom deals, where new systems have to be created by consultants,”
he said.
Frontier faces a
“substantial” challenge in digesting assets twice its size, Moody’s Investors
Service said in a report on Sept. 18. Moody’s said in May it may raise
Frontier’s rating because the Verizon deal increases the company’s size,
improving efficiency. Moody’s said it will focus on the integration process as
it reviews Frontier’s ratings.
Last month,
Charlotte, North Carolina-based carrier FairPoint Communications Inc. filed for
bankruptcy protection after struggling to absorb phone lines purchased from
Verizon. FairPoint also faced opposition from trade unions, which said its deal
would hurt service quality.
Moody’s rates
Frontier Ba2, and Standard and Poor’s rates it BB. Both ratings are two steps
below investment grade.
Mobile-Phone
Trial
Wilderotter also
said Frontier will start testing a mobile- phone service in Tennessee next week
that lets customers use a Wi-Fi wireless-Internet connection. When not in a
Wi-Fi range, the call will connect using mobile-phone networks. Calls won’t drop
when moved from one network to the other.
That would save
customers as much as 40 percent, she said.
Frontier plans to
sell handsets by “major manufacturers” and will rent mobile-network capacity
from a “nationwide” carrier.
Yesterday, Frontier
posted an 11 percent increase in third- quarter profit, helped by cost cuts.
Sales slid 5.6 percent to $526.8 million as access lines fell 6.3 percent to
2.15 million.
Frontier declined 1
cent to $7.19 at 2:03 p.m. on the New York Stock Exchange. The shares had
dropped 18 percent this year before today.
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 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; the failure to obtain, delays in obtaining or adverse
conditions contained in any required regulatory approvals for the Verizon
transaction; the failure to receive the IRS ruling approving the tax-free status
of the Verizon transaction; the failure of our stockholders to approve the
Verizon transaction; the ability to successfully integrate the Verizon
operations into our existing operations; the effects of increased expenses due
to activities related to the Verizon transaction; the ability to migrate
Verizon’s West Virginia operations from Verizon owned and operated systems and
processes to Frontier owned and operated systems and processes successfully; the
risk that the growth opportunities and cost synergies from the Verizon
transaction may not be fully realized or may take longer to realize than
expected; the sufficiency of the assets to be acquired from Verizon to enable us
to operate the acquired business; disruption from the Verizon transaction making
it more difficult to maintain relationships with customers, employees or
suppliers; the effects of greater than anticipated competition requiring new
pricing, marketing strategies or new product or service offerings and the risk
that we will not respond on a timely or profitable basis; reductions in the
number of our access lines and High-Speed Internet subscribers; our ability to
sell enhanced and data services in order to offset ongoing declines in revenue
from local services, switched access services and subsidies; the effects of
ongoing changes in the regulation of the communications industry as a result of
federal and state legislation and regulation; the effects of competition from
cable, wireless and other wireline carriers (through voice over internet
protocol (VOIP) or otherwise); our ability to adjust successfully to changes in
the communications industry and to implement strategies for improving growth;
adverse changes in the credit markets or in the ratings given to our debt
securities by nationally accredited ratings organizations, which could limit or
restrict the availability, or increase the cost, of financing; reductions in
switched access revenues as a result of regulation, competition and/or
technology substitutions; 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; changes in accounting policies or practices
adopted voluntarily or as required by generally accepted accounting principles
or regulators; our ability to effectively manage our operations, operating
expenses and capital expenditures, to pay dividends and to repay, reduce or
refinance our debt; 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; 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;
further declines in the value of our pension plan assets, which could require us
to make contributions to the pension plan beginning no earlier than 2010; 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 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, including our reports on Forms 10-K and 10-Q, and the foregoing
information should be read in conjunction with these filings. 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 filing is not
a substitute for the definitive prospectus/proxy statement included in the
Registration Statement on Form S-4 that Frontier filed, and the SEC has declared
effective, in connection with the proposed transactions described in the
definitive prospectus/proxy statement. INVESTORS ARE URGED TO READ THE
DEFINITIVE PROSPECTUS/PROXY STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION,
INCLUDING DETAILED RISK FACTORS. The definitive prospectus/proxy statement and
other documents filed or to be filed by Frontier with the SEC are or 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’s
stockholders approved the proposed transactions on October 27, 2009, and no
other vote of the stockholders of Frontier or Verizon is required in connection
with the proposed transactions.