form425.htm
Filed by
Frontier Communications Corporation
Pursuant
to Rule 425 under the Securities Act of 1933
Under the
Securities Exchange Act of 1934
Subject
Company: Frontier Communications Corporation
Registration
Statement No. 333-160789
The following article was posted
on the Company's intranet site on November 10, 2009:
Integrating
the Verizon assets – We’re on the way to becoming America’s #1 rural
communications carrier
11/10/2009
Frontier is in the
process of acquiring approximately 4.8 million access lines from Verizon
Communications (on a pro forma basis as of December 31, 2008) and on the way to
becoming America’s #1 communications carrier focused on rural areas and small
and medium-sized towns and cities. The transaction involves 14 states
(Frontier currently provides service in 11 of the states) and has attracted a
lot of interest, including news reports that don’t always reflect the
facts.
It’s important you
have facts and hear straight talk, so we’ve created a site on the Link
where you can find the latest news about the transaction. You can also
submit questions and every few weeks we will answer the top
questions.
Here’s some basic
information to start:
News to date: A lot of
information is on our transaction website at
www.frontier.com/ir. Press releases, transcripts, video clips and
more are available for viewing. Check it out!
FAQs and Answers:
“Is Frontier taking on too much
debt?”
No. It now
takes Frontier about 5 days worth of revenue to pay the monthly interest expense
on our debt. After this transaction it will take only three days.
Although our total debt will increase, our total annual revenue will increase
even more. Think of your monthly mortgage and the days when the banks
would give you a mortgage that would require a monthly payment @ one-third of
your monthly take home income (or, said another way, 10 days worth of your
monthly income would go to your housing debt). This transaction is
expected to make us a healthier debtor, with only three days of revenue needed
to pay interest!
“What
about FairPoint? It acquired lines from Verizon and now it has declared
bankruptcy!”
Let’s use the debt
analogy above for the FairPoint transaction. After FairPoint completed its
transaction its revenue didn’t increase as fast as its debt increased. As
a result, the number of days it needed to pay off its monthly interest expense
increased by 30% - the opposite of our situation. Secondly, FairPoint
didn’t have a unified set of systems to migrate the Verizon customers onto;
consequently, it chose to i) build 60 new systems from scratch; ii) integrate
the 60 systems, and iii) migrated their new Verizon customers onto the
systems. The integration was deeply flawed; customers couldn’t be billed
properly so vendors were not paid promptly. It was a mess.
In
contrast, 13 of the 14 states in which we are acquiring Verizon assets will run
on a separate billing platform that comes with the transaction. Only West
Virginia must be converted to Frontier’s system by closing. In the 13
other states, we can migrate new customers onto Frontier’s systems when we
choose to do so. This is a huge difference between the FairPoint and
Frontier transactions.
Third, FairPoint
had never done such a large acquisition or integration. Frontier has a
record of successful acquisitions and conversions. In fact, the
integration of the West Virginia customers onto our systems will be about the
size of the Commonwealth Telephone integration. As we like to say in
Montana, “This isn’t our first rodeo!”
That’s all for our
first edition. Again, if you have questions, send them using the
online submission form. We’ll post answers to the most commonly asked
questions and recent news on the Integration website.
In the meantime, it
is crucially important that we remain focused on our current customers.
Making our numbers and delivering results is what will prove to those watching
us so closely increases their confidence that we are ready, willing and able and
the best choice to grow this business.
Thank
you,
Lois
Hedg-peth
Executive Vice
President, Verizon Integration
Forward-Looking
Language
This communication
contains forward-looking statements that are made pursuant to the safe harbor
provisions of The Private Securities Litigation Reform Act of 1995. These
statements are made on the basis of management’s views and assumptions regarding
future events and business performance. Words such as “believe,” “anticipate,”
“expect” and similar expressions are intended to identify forward-looking
statements. Forward-looking statements (including oral representations) involve
risks and uncertainties that may cause actual results to differ materially from
any future results, performance or achievements expressed or implied by such
statements. These risks and uncertainties are based on a number of factors,
including but not limited to: our ability to complete the acquisition of access
lines from Verizon; the failure to obtain, delays in obtaining or adverse
conditions contained in any required regulatory approvals for the Verizon
transaction; the failure to receive the IRS ruling approving the tax-free status
of the Verizon transaction; the failure of our stockholders to approve the
Verizon transaction; the ability to successfully integrate the Verizon
operations into our existing operations; the effects of increased expenses due
to activities related to the Verizon transaction; the ability to migrate
Verizon’s West Virginia operations from Verizon owned and operated systems and
processes to Frontier owned and operated systems and processes successfully; the
risk that the growth opportunities and cost synergies from the Verizon
transaction may not be fully realized or may take longer to realize than
expected; the sufficiency of the assets to be acquired from Verizon to enable us
to operate the acquired business; disruption from the Verizon transaction making
it more difficult to maintain relationships with customers, employees or
suppliers; the effects of greater than anticipated competition requiring new
pricing, marketing strategies or new product or service offerings and the risk
that we will not respond on a timely or profitable basis; reductions in the
number of our access lines and High-Speed Internet subscribers; our ability to
sell enhanced and data services in order to offset ongoing declines in revenue
from local services, switched access services and subsidies; the effects of
ongoing changes in the regulation of the communications industry as a result of
federal and state legislation and regulation; the effects of competition from
cable, wireless and other wireline carriers (through voice over internet
protocol (VOIP) or otherwise); our ability to adjust successfully to changes in
the communications industry and to implement strategies for improving growth;
adverse changes in the credit markets or in the ratings given to our debt
securities by nationally accredited ratings organizations, which could limit or
restrict the availability, or increase the cost, of financing; reductions in
switched access revenues as a result of regulation, competition and/or
technology substitutions; the effects of
changes in both
general and local economic conditions on the markets we serve, which can impact
demand for our products and services, customer purchasing decisions,
collectability of revenue and required levels of capital expenditures related to
new construction of residences and businesses; our ability to effectively manage
service quality; our ability to successfully introduce new product offerings,
including our ability to offer bundled service packages on terms that are both
profitable to us and attractive to our customers; changes in accounting policies
or practices adopted voluntarily or as required by generally accepted accounting
principles or regulators; our ability to effectively manage our operations,
operating expenses and capital expenditures, to pay dividends and to repay,
reduce or refinance our debt; the effects of bankruptcies and home foreclosures,
which could result in increased bad debts; the effects of technological changes
and competition on our capital expenditures and product and service offerings,
including the lack of assurance that our ongoing network improvements will be
sufficient to meet or exceed the capabilities and quality of competing networks;
the effects of increased medical, retiree and pension expenses and related
funding requirements; changes in income tax rates, tax laws, regulations or
rulings, and/or federal or state tax assessments; the effects of state
regulatory cash management policies on our ability to transfer cash among our
subsidiaries and to the parent company; our ability to successfully renegotiate
union contracts expiring in 2009 and thereafter; further declines in the value
of our pension plan assets, which could require us to make contributions to the
pension plan beginning no earlier than 2010; our ability to pay dividends in
respect of our common shares, which may be affected by our cash flow from
operations, amount of capital expenditures, debt service requirements, cash paid
for income taxes (which will increase in 2009) and our liquidity; the effects of
any unfavorable outcome with respect to any of our current or future legal,
governmental or regulatory proceedings, audits or disputes; the possible impact
of adverse changes in political or other external factors over which we have no
control; and the effects of hurricanes, ice storms or other severe weather.
These and other uncertainties related to our business are described in greater
detail in our filings with the Securities and Exchange Commission, including our
reports on Forms 10-K and 10-Q, and the foregoing information should be read in
conjunction with these filings. We undertake no obligation to publicly update or
revise any forward-looking statement or to make any other forward-looking
statements, whether as a result of new information, future events or otherwise
unless required to do so by securities laws.
Additional
Information and Where to Find It
This communication
is not a substitute for the definitive prospectus/proxy statement included in
the Registration Statement on Form S-4 that Frontier filed, and the SEC has
declared effective, in connection with the proposed transactions described in
the definitive prospectus/proxy statement. INVESTORS ARE URGED TO READ THE
DEFINITIVE PROSPECTUS/PROXY STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION,
INCLUDING DETAILED RISK FACTORS. The definitive prospectus/proxy statement and
other documents filed or to be filed by Frontier with the SEC are or will be
available free of charge at the SEC’s website, www.sec.gov, or by directing a
request when such a filing is made to Frontier, 3 High Ridge Park, Stamford, CT
06905-1390, Attention: Investor Relations.
This communication
shall not constitute an offer to sell or the solicitation of an offer to buy
securities, nor shall there be any sale of securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of such jurisdiction.
Frontier’s
stockholders approved the proposed transactions on October 27, 2009, and no
other vote of the stockholders of Frontier or Verizon is required in connection
with the proposed transactions