Fron­tier sells ter­ri­to­ries in 4 states for $1.35B

The News-Times - - BUSINESS - By Alexan­der Soule

A pri­vate eq­uity in­vest­ment syn­di­cate is buy­ing Fron­tier Com­mu­ni­ca­tions ter­ri­to­ries in four western states, pay­ing $1.35 bil­lion for the op­er­a­tions, weeks af­ter in­vestors sent the com­pany’s CEO and board of di­rec­tors a loud cri­tique on his stew­ard­ship of the tele­phone gi­ant.

Fron­tier gen­er­ated rev­enue of $619 mil­lion and prof­its of $42 mil­lion over 12 months through March from the ter­ri­to­ries in Washington, Ore­gon, Idaho and Mon­tana, with the com­pany hav­ing about 350,000 cus­tomer ac­counts in the four states, in­clud­ing about 150,000 cus­tomers get­ting broad­band over fiber op­tic ca­ble.

It is Fron­tier’s first ma­jor di­vest­ment since spend­ing $10.5 bil­lion three years ago to ac­quire Ver­i­zon Com­mu­ni­ca­tions ter­ri­to­ries in Florida, Texas and Cal­i­for­nia, in the process in­cur­ring sig­nif­i­cant debt that the Norwalk-based com­pany has vowed to trim as loans reach ma­tu­rity in the com­ing years.

Un­der CEO Dan Mc­Carthy, Fron­tier has been chip­ping away at its debt obli­ga­tions across sev­eral fronts, in­clud­ing job cuts and the sale of real es­tate in­clud­ing op­er­a­tions cen­ters and wire­less tow­ers. Af­ter los­ing $87 mil­lion in the first quar­ter on rev­enue of $2.1 bil­lion, Fron­tier’s debt load to­taled $16.9 bil­lion.

Shares climbed 10 per­cent Wed­nes­day to $1.90, a quar­ter of their level of a year ago on an ad­justed ba­sis and with shares hav­ing topped $125 just over four years ago.

The western op­er­a­tions are be­ing sold to WaveDivi­sion Cap­i­tal, a Kirk­land, Wash.-based in­vest­ment firm created by Steve Weed who founded Wave Broad­band pro­vid­ing ser­vice in Washington, Ore­gon and Cal­i­for­nia. The com­pany was sold two years ago for nearly $2.4 bil­lion to TPG, which merged it with RCN to form what at the time was the sixth largest ca­ble com­pany in the coun­try.

“We are big be­liev­ers in the North­west’s fu­ture growth op­por­tu­ni­ties and that fu­ture runs on broad­band,”

Weed said in a pre­pared state­ment is­sued in tan­dem with Fron­tier’s cor­po­rate state­ment. “We know what it takes to bring fiber and other ad­vanced ser­vices to res­i­den­tial and busi­ness cus­tomers, give them choices, and keep them happy.”

Search­light Cap­i­tal in­vested along­side WaveDivi­sion on the Fron­tier deal, with its manag­ing part­ner in New York City Eric Zin­ter­hofer the lead in­de­pen­dent di­rec­tor on the board of Char­ter Com­mu­ni­ca­tions, the na­tion’s se­cond largest ca­ble com­pany based in Stam­ford.

The trans­ac­tion is sub­ject to the ap­proval of the U.S. Depart­ment of Jus­tice, Fed­eral Com­mu­ni­ca­tions Com­mis­sion, state reg­u­la­tors and lo­cal boards that over­see ca­ble TV fran­chises.

Only three weeks ago, Fron­tier in­vestors voted down the com­pany’s pro­posed com­pen­sa­tion for Mc­Carthy and other cor­po­rate of­fi­cers, af­ter ap­prov­ing ex­ec­u­tive com­pen­sa­tion over­whelm­ingly only a year ear­lier that at $2.9 mil­lion for Mc­Carthy rep­re­sented a slight de­cline.

As the case with many other pub­lic com­pa­nies, Fron­tier’s board so­lic­its the “say on pay” feed­back on an ad­vi­sory ba­sis only, with the board’s com­pen­sa­tion com­mit­tee led by for­mer Ver­i­zon ex­ec­u­tive Vir­ginia Ruester­holz.

Hearst Connecticu­t Me­dia file photo

The head­quar­ters build­ing of Fron­tier Com­mu­ni­ca­tions at 401 Mer­ritt 7 in Norwalk.

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