AP Interview: FairPoint CEO aims to prove skeptics wrong
SOUTH PORTLAND, Maine --Fairpoint Communications Inc. CEO Gene Johnson dismissed a plunge in the stock price as he talked up his company's plans a day after completing a $2.3 billion deal for Verizon's wired telephone and Internet business in northern New England.
Johnson said Tuesday that skeptics will be won over in the months ahead as FairPoint takes over Verizon's land-based assets in Maine, New Hampshire and Vermont.
Investors, he added, should be pleased with the stock performance.
"The proof is in the pudding, and we're going to make some pretty good pudding," Johnson told The Associated Press in an interview at one of FairPoint's regional offices.
Johnson was in New York on Monday to close the deal with Verizon Communications Inc. At the end of the day, he pounded the gavel at the closing bell on the New York Stock Exchange.
On Tuesday, he was in Maine meeting with FairPoint employees, Gov. John Baldacci and legislative leaders. He planned to be in New Hampshire on Wednesday and Vermont on Thursday.
In an interview, the 60-year-old Johnson -- who founded FairPoint in 1991 -- gave his take on the region's regulatory and business climate, as well as his outlook for the company's growth prospects and stock performance. FairPoint, he said, should be thought of as an Internet company, not an old-fashioned telephone company.
The first day of the deal wasn't kind to investors, with FairPoint's stock price plunging more than 25 percent before rebounding to close the day with a 12 percent decline. The price fell another 9 percent on Tuesday.
Johnson said much of Monday's fall was due to technical trading, and he dismissed a Goldman Sachs analyst report that downgraded FairPoint's stock to "sell" and said the Verizon deal pushed the company's risk "materially higher."
"I think the guy that wrote that is nuts and I don't think he did his homework very well, personally," Johnson said. "I think the facts will refute that. I think we're going to do extraordinarily well."
Others agree with Johnson. An analyst with J.P. Morgan said downward pressure will continue over the next couple of weeks as Verizon shareholders and stock-index funds sell FairPoint shares they received as part of the deal. But the analyst, Jonathan Chaplin, believes FairPoint is undervalued.
Looking forward, the biggest risks in the deal are now past, Johnson said. FairPoint has already resolved the regulatory risk of not having the sale approved, the financial risk of not being able to raise capital, and the labor risk of not reaching contract agreements with employee unions.
A major task ahead is to develop and test a complex new operating system for the network, he said. Nobody expects the transition to be perfect.
"Something will go wrong and we know it," he said. "We don't know what it'll be, but when it does we'll be ready for it and we'll fix it."
FairPoint isn't so much a telephone company -- "that's old school" -- as a high-speed, broadband Internet company, Johnson said. As part of the deal with Verizon, it acquired 233,000 Internet customers, and Johnson sees that as having the greatest potential for growth.
The company has committed to expanding high-speed Internet access across the three states and spending $141 million within a year to upgrade its network.
"Broadband is the future of our business and we know that," Johnson said. "We know we can add a lot of revenues from that. So this network upgrade we're doing is crucial to the future of our business."
FairPoint now owns 32 phone companies in 18 states, but northern New England is by far its biggest holding, representing 85 percent of its phone lines.
But the company will keep its headquarters in Charlotte, N.C., because that's where Johnson lives.
Still, many of FairPoint's top executives work in the Portland area or in Manchester, N.H., and FairPoint President Peter Nixon has an apartment in Portland, he said. 