NEW YORK -- Verizon Communications vz says it has reached a deal to shed its traditional telephone line business in 14 states in a deal worth $8.6 billion.
Frontier Communications ftr, based in Stamford, Conn., will be taking over the Verizon assets in an all-stock deal, the companies say.
The deal will triple Frontier's size and make it the nation's largest communications provider focused on providing voice, broadband and video services to rural markets and smaller cities.
Verizon said divesting the landlines will help it focus on its broadband, wireless and Internet businesses.
Maggie Wilderotter, Frontier's chairman and chief executive, said, "This is a truly transformational transaction for Frontier. With more than 7 million access lines in 27 states ... (we are) "confident that we can dramatically accelerate the penetration of broadband in these new markets. "
Under the deal, Verizon will create a separate company for the assets being sold. That company will simultaneously be spun off to shareholders and merged with Frontier. It will carry $3.3 billion of debt that will be assumed by Frontier.
The transaction is expected to close within 12 months, the companies said.
The deal gives Frontier 4.8 million access lines to residential and small business customers.
The deal includes Verizon's wireline 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.
In its press release, Verizons says, "As of year-end 2008, these operations served approximately ... 2.2 million long-distance customers; 1.0 million high-speed data customers, including approximately 110,000 FiOS Internet customers; and 69,000 FiOS TV customers."
Not included in the Frontier deal are Verizon's wireline operations in Connecticut, Delaware, District of Columbia, Florida, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, Texas, Virginia and most of California.
Frontier says it expects to save $500 million annually, by leveraging existing networks and infrastructure. About 11,000 Verizon employees who support the landlines will move to Frontier with union contracts intact, Verizon said.