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January 16, 2007
CHARLOTTE, N.C. -- FairPoint Communications, Inc. (NYSE: FRP) announced today that it has agreed to merge with a subsidiary of Verizon Communications Inc. owning the wireline operations of Verizon in Maine, New Hampshire and Vermont. After the merger, FairPoint shareholders will hold a significant stake in a combined company with enhanced scale in terms of lines, revenues and cash flow. Based on the number of access lines as of September 30, 2006, the combined company will be the 8th largest telephone company in the United States.
The combined company will serve approximately 1.6 million access lines, 234,000 high-speed data subscribers and 600,000 long distance customers, and will provision 160,000 wholesale lines (as of September 30, 2006). The transaction is a major strategic step forward in generating value for shareholders as FairPoint accelerates its strategy. This transaction is meaningfully accretive to free cash flow after the transition is complete. In addition, the transaction allows FairPoint to reduce leverage and increase the stability of its dividend. The company expects that its dividend will be maintained at $1.59 per share annually , with its dividend payout ratio declining to 60%-70% (after achievement of expected cost-savings).
The transaction combines Verizon's personnel and local exchange and related business assets from Maine, New Hampshire and Vermont with the focus and specialized expertise of FairPoint. As of September 30, 2006, FairPoint served 252,000 access lines through its 31 local exchange companies in 18 states, with 64,000 access lines currently located in Maine, New Hampshire and Vermont. The company has demonstrated its ability to provide high-quality operations dedicated to the unique needs of rural and smaller urban areas, offering an array of services, including local and long distance voice, data, Internet and broadband offerings. This business combination will allow FairPoint to apply its operating experience and expertise on a significantly larger scale.
In addition to the benefits to its cash flows after the transition and to the company's balance sheet, FairPoint believes this merger will result in significant value creation opportunities through improved revenue opportunities and enhanced operational efficiencies.
"This is an important day that further validates our strategic vision and provides greater certainty for the future of our company. We believe that this combination remarkably accelerates our existing plan to ensure favorable returns for FairPoint shareholders, while continuing to emphasize high-quality service for our customers and a rewarding work environment for our employees," said Gene Johnson, Chairman and CEO of FairPoint. "The ability to integrate and serve these northern New England operations will establish FairPoint as one of the preeminent telecommunications operators in the region. We are confident that our experience as a national operator will enable us to provide high levels of service and innovative new products."
FairPoint Communications Inc.
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