Frontier will buy Verizon's wireline assets in three states, while American Tower is acquiring most of the carrier's wireless cell towers.

Sarah Thomas, Director, Women in Comms

February 5, 2015

4 Min Read
Verizon Sells Towers & Wireline Assets for $15B

As expected, Verizon confirmed both the sale of most of its wireless cell towers to American Tower Corporation and the sale of its wireline assets in three states to Frontier Communications on Thursday afternoon, deals that will net the carrier a total of $15.54 billion.

Reports had surfaced earlier this month that Verizon was looking to sell off both wireless cell towers and its wireline assets to pay down its debt associated with taking control of Verizon Wireless from Vodafone Group plc (NYSE: VOD), as well as to pay off its hefty spectrum auction fees. (See Vodafone Agrees to $130B Verizon Stake Sale and Hey Big Spenders! AT&T, Dish & VZ Splash Cash on Spectrum.)

American Tower Corp. (NYSE: AMT) and Frontier Communications Corp. (NYSE: FTR) were revealed Thursday as the benefactors of its cash grab.

American Tower Corp.
First up, American will acquire rights to around 11,324 towers and will purchase around 165 additional towers from Verizon for $5.056 billion in cash at closing.

Under the terms of the deal, American Tower gets exclusive rights to lease and operate the Verizon Communications Inc. (NYSE: VZ) towers for approximately 28 years. The tower company will also get fixed price purchase options to acquire the towers based on their anticipated fair market values at the end of the lease terms. (See Verizon Plotting Tower, Wireline Sale – Report.)

In a statement on the deal, American Tower CEO Jim Taiclet praised Verizon towers' leasing potential, defined by their height of 200 feet, ample structural capacity and ground space, attractive transmission locations, solid ground lease profile and excellent document and technical information. The towers span all 50 states with half of the sites in American's top 100 basic trading areas (BTAs).

This buy will make American the biggest tower company, beating out current leader Crown Castle International Corp. (NYSE: CCI) with more than 40,000 total tower sites. (See AT&T to Sell, Lease Cell Towers for $4.85B and T-Mobile USA in $2.4B Towers Deal.)

For Verizon, the carrier will sublease space on its towers for a minimum of 10 years, and potentially up to 50, with a monthly rent of $1,900 per site and fixed annual rent increases of 2%.

Need to know more about 4G? Visit Light Reading's 4G/LTE channel.

Frontier Communications
Frontier is spending $10.54 billion -- $9.9 billion in cash, plus $600 million in assumed debt -- for Verizon's wireline assets in California, Florida and Texas. Verizon CEO Lowell McAdam said on a call Thursday that these states were good performers for Verizon, but were hard to scale given their distance from Verizon's 25 other states with a wireline business. By selling them off, Verizon’s wireline operations are now concentrated on the East Coast.

Frontier says the deal will double its size and add 35% to its cash flow during the first year. As part of the deal, Verizon is transferring 11,000 employees to Frontier and says it will work with Frontier to ensure a smooth transition for the employees, as well as Verizon's customers in those states.

At the end of fourth quarter of last year, Verizon had around 3.7 million voice customers, 2.2 million high-speed data customers (including approximately 1.6 million FiOS Internet customers) and 1.2 million FiOS Video customers in those three states.

"Our agreements to monetize our towers and sell wireline assets in Florida, Texas and California are straightforward and create value for all parties," McAdam said on a call Thursday.

Verizon ended 2015 with $10.6 billion of cash on hand, which it plans to use to fund a $5 billion accelerated share-repurchase program, also announced on Thursday.

Verizon expects the American deal to close during the first half of the year and Frontier in the first half of 2016. Its shares are up 6 cents -- or .13% -- at $47.86 Thursday afternoon.

— Sarah Thomas, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editorial Operations Director, Light Reading

About the Author(s)

Sarah Thomas

Director, Women in Comms

Sarah Thomas's love affair with communications began in 2003 when she bought her first cellphone, a pink RAZR, which she duly "bedazzled" with the help of superglue and her dad.

She joined the editorial staff at Light Reading in 2010 and has been covering mobile technologies ever since. Sarah got her start covering telecom in 2007 at Telephony, later Connected Planet, may it rest in peace. Her non-telecom work experience includes a brief foray into public relations at Fleishman-Hillard (her cussin' upset the clients) and a hodge-podge of internships, including spells at Ingram's (Kansas City's business magazine), American Spa magazine (where she was Chief Hot-Tub Correspondent), and the tweens' quiz bible, QuizFest, in NYC.

As Editorial Operations Director, a role she took on in January 2015, Sarah is responsible for the day-to-day management of the non-news content elements on Light Reading.

Sarah received her Bachelor's in Journalism from the University of Missouri-Columbia. She lives in Chicago with her 3DTV, her iPad and a drawer full of smartphone cords.

Away from the world of telecom journalism, Sarah likes to dabble in monster truck racing, becoming part of Team Bigfoot in 2009.

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