PSB rejects Fairpoint’s bid to buy Verizon’s land line service in Vermont

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(Host) The state Public Service Board has rejected FairPoint Communication’s request to buy Verizon’s land line phone service in Vermont.

The board found that FairPoint had not demonstrated that it would be financially sound, as it seeks to operate Verizon’s service territories in Maine, New Hampshire, and Vermont.

But the board also invited FairPoint to submit a revised proposal. And it laid out some conditions it would impose — if it approved the deal.

VPR’s John Dillon reports:

(Dillon) FairPoint needs approval of regulators in all three states for the deal to go ahead. The Vermont decision was the first to be released. And it wasn’t what Fairpoint wanted to hear.

By taking over Verizon’s territory, the North Carolina company would gain five times the number of phone lines it currently has. It’s also promised to aggressively roll out new broadband internet services. The Public Service Board questioned FairPoint’s financial ability to do the job.

The board pointed out that FairPoint will have to have to borrow $2.5 billion to acquire Verizon’s assets.

It said that this debt – coupled with projections of future revenue -could force the company to reduce investment or slow its broadband expansion.

But the board then did something very unusual. Although it rejected the deal as it was presented, it kept the case open for a revised proposal.

(OBrien) I believe, I’m confident, in fact, that the company and perhaps both companies have the means to come back and satisfy the board.

(Dillon) David O’Brien is Vermont’s commissioner of public service. He runs the state agency that represents consumers. And he says it’s up to FairPoint and Verizon to now negotiate a better deal for customers.

(O’Brien) I suspect that they will come back fairly quickly with some ideas. We’re open to hearing what they are. And, you know, I’d like to believe that there is a way to meet the board’s concerns.

(Dillon) A FairPoint spokeswoman described the board’s decision as – quote – "a procedural move." The spokeswoman said the company views the order as an invitation to discuss new conditions.

The Vermont order follows a proposed settlement of the case in Maine. In that settlement – which still has to be approved — Verizon agreed to drop the sale price by $235 million and Fairpoint agreed to reduce its stock dividend.

The Vermont board specifically pointed out that its review did not include the new terms outlined in the Maine deal.

So it’s possible that FairPoint could come back with a similar proposal in Vermont.

Labor unions that represent Verizon workers had opposed the deal. Ralph Montefusco of the Communications Workers of America said the concessions the company made in Maine do not go far enough.

(Montefusco) What’s being proposed and discussed in Maine, while it would lower the purchase price, and would change the finances is still not even close to what we would consider adequate to take the risk to consumers out of the deal.

(Dillon) O’Brien said next move is up to FairPoint. He said Verizon now serves more customers than any other utility in Vermont. So he said getting the deal right is vitally important to the state’s plan to improve phone and Internet service.

For VPR News, I’m John Dillon in Montpelier.

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