There was a major deal in the northeastern wireline telecom market this morning, with Frontier Communications acquiring AT&T’s wireline business in Connecticut. For $2B in cash, Frontier will get 415K data, 900K voice, and 180K video residential connections, statewide fiber and copper, another 2,700 employees, and of course the business customers too.
That AT&T would like to have less copper to worry about so it can focus more on wireless is no secret, but getting there has been a long process. Connecticut is not one of the company’s bigger regional markets, and New England has always been more Verizon and Fairpoint turf as a whole. While AT&T has been looking at buying wireless assets overseas, with Vodafone being one rather public example, when it comes to their US wireline footprint they’d clearly rather be smaller, that Austin FTTH rollout notwithstanding.
As for Frontier, operating this sort of out-of-favor, copper-heavy wireline business is their core competence. Back in 2009 they bought a suite of Verizon territories across 14 states in a substantially larger transaction, and spent the next couple of years digesting them. So for AT&T’s Connecticut business it will be more of the same. They are planning $200M of annual cost synergies and are estimating an improvement by as much as 5 percentage points on their dividend payout ratio. The Connecticut operations generated $1.2B in revenue last year for AT&T.