Verizon to sell lines in N.H., Vt., and Maine

Verizon Communications Inc. said yesterday that it would spin off its land-line business in Maine, New Hampshire, and Vermont to FairPoint Communications Inc. in a $2.72 billion deal that analysts said would help the phone giant focus on its high-speed fiber-optic network.

Over the next year, if the deal wins regulatory and shareholder approval, Verizon will transfer control of its operations in the three states to FairPoint, a Charlotte, N.C., telecommunications company, which has vowed to expand rural broadband Internet access and add 600 jobs in the region.

"Our first reaction is cautious optimism," said David O'Brien , commissioner of the Vermont Department of Public Service. Verizon has invested billions in upgrading its fiber-optic network in other areas of the country, but "we are struggling to get high-speed Internet access to all of our citizens, and to have the kind of telecommunications network that allows us to compete economically."

Under Verizon, local phone lines in rural areas were a peripheral part of its business, but under FairPoint, the northern New England states will become the central focus. FairPoint, which does not expect to change rates, has about 300,000 voice and data lines today; after the merger it will have more than 2 million.

"We are a rural, small-urban focused company," said Walt Leach, executive vice president of corporate development for FairPoint. These are "our bread and butter customers. They're not strategically important to" Verizon, which is focused on bigger markets and cable competition. "This is the most important part of our business."

Under terms of the deal, FairPoint will assume about $1.7 billion of Verizon debt. After the spinoff, Verizon shareholders will receive $1 billion of FairPoint stock, and own about 60 percent of the company, which will be under FairPoint's control.

Analysts said the deal fits with Verizon's strategy of getting rid of local phone lines as it invests in its FiOS network. The company sold about 700,000 access lines in Hawaii in 2005 and 1.27 million access lines in Alabama, Missouri, and Kentucky in 2002, according to a Verizon spokesman, Phil Santoro.

But the merger will likely benefit rural customers by putting them in the hands of a company that specializes and focuses on rural markets, according to John Byrne , analyst at Technology Business Research in New Hampshire.

Verizon serves 1.5 million access lines, 180,000 DSL customers, and 600,000 long-distance customers in the three states. The company offers DSL Internet access to about 60 percent of households there. In contrast, FairPoint offers DSL access to about 80 percent of households it serves.

But in southern New Hampshire, where FairPoint will take over the high-speed FiOS fiber-optic network available to 80,000 households, customers who may have expected to see FiOS TV offerings won't likely see "triple-play" bundles of voice, television, and Internet in the near future.

"Clearly, video will be a consideration, but we don't want to get distracted by that," as FairPoint takes over, Leach said. "We are going to increase high-speed data right out of the box."

Kurt Adams , chairman of the Public Utilities Commission in Maine, said he cannot comment on details, but that merger hearings would likely focus on broadband investment, service quality, and rates.

O'Brien said that after suffering "subpar" network reliability from Verizon, "we're anxiously looking for someone who sees the Vermont territory as central to their business."

Steve Early , a Communications Worker of America representative, said his organization, which represents customer service representatives, will oppose the merger because it could harm both consumers and workers.

FairPoint has said there will be no job cuts. About 3,000 Verizon employees would continue with FairPoint after the merger, and 300 Verizon employees in the three states would stay with Verizon .

Even so, Early doubts that FairPoint would have the resources to upgrade broadband Internet access.

Carolyn Y. Johnson can be reached at cjohnson@globe.com.