FairPoint Communications is being sold.
Illinois-based Consolidated Communications says it’s buying FairPoint for $1.5 billion, starting a new chapter in the troubled history of northern New England’s largest telecommunications network.
The news broke in a morning conference call for investors: Consolidated will buy 100 percent of FairPoint’s stock for a total of $1.5 billion. Together, the merged companies will provide services in 24 states, operating 35,000 miles of fiber optic lines.
“Today’s news is all about the futures of Consolidated Communications and FairPoint. We believe the news is very good,” says Bob Udell, CEO of Consolidated Communications, which operates broadband and other communication services in 11 states from its Mattoon, Illinois, headquarters.
He says like most providers of “legacy” landline service, FairPoint has lost revenues as customers migrated en masse to cellphone service. But FairPoint has also invested more than $1 billion, Udell says, building fiber-optic networks and infrastructure that increasingly provide the backbone for cellphone and Internet communications.
Udell says Consolidated should be able to build on to add services for customers — and profits for shareholders.
“That’s why I say it’s the right time in their history for us to come together. We’re going to bring an accelerated focus on stepping up those investments where we think more bandwidth capability is needed to both temper the legacy revenue declines and create upside in the commercial space,” he says.
FairPoint took over Verizon’s book of business in Maine, New Hampshire and Vermont 10 years ago — a transaction that proved problematic for FairPoint, its workers and its customers. Since that takeover the company has gone through union strikes, been investigated for multiple failures to meet basic service quality standards and, in 2011, it went bankrupt.
FairPoint this year saw its first profits after emerging from that financial ordeal. So regulators and union officials are wary of the new deal.
“The last time these assets were sold to FairPoint it was a disastrous outcome for Maine customers,” says Tim Schneider, Maine’s public advocate, charged with protecting telephone customers in state proceedings.
Schneider says he and regulators throughout northern New England will be scrutinizing the new deal in an effort to prevent a repeat of the last one.
“Our office and a lot of other interested parties frankly will be wanting to make sure that if the transaction is approved that the transition happens smoothly and without affecting customers,” he says. “Another thing we’ll be looking out for to see if the new owners do right by customers.”
During the call with investors, Consolidated officials said there were several factors that made the deal good one. In addition to FairPoint’s billion-dollar infrastructure investment, for instance, its renegotiated union contract lessened the burden of future worker retirement costs.
That was no surprise to Peter McLaughlin, IBEW’s council for some 1,400 FairPoint workers in New England’s three northernmost states.
“We’ve been saying for a while that the company has positioned itself for sale, just by who the owners are and their actions and how they are setting the company up to operate,” he says. “You know the term ‘cautiously optimistic,’ right? I think we are.”
Investors’ view of the deal appeared to be mixed. In the first day of trading after it was announced, FairPoint’s stock jumped 10 percent. Consolidated’s dropped 4 percent.