FairPoint touts its financial strength

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(Host) The company that wants to take over Verizon’s telephone lines in northern New England says it has the financial strength to improve service and add jobs.

A top executive at FairPoint Communications is disputing a research report that casts doubt on the company’s finances.

VPR’s John Dillon reports:

(Dillon) FairPoint is a North Carolina based company that wants to acquire Verizon’s land lines in Maine, New Hampshire, and Vermont.

The deal would transform FairPoint overnight from the 18th largest phone company to the eighth largest.

But critics, including labor unions and some politicians in the three states, have questioned FairPoint’s financial ability to do the deal.

They found new ammunition in a recent report by the Morgan Stanley financial services company. The report said that that the company may not be able to generate cash to cover its next dividend. And it says the company stands to lose up to $55 million if the Verizon deal falls through.

Essex Orleans Senator Vince Illuzzi chairs the Senate Economic Development Committee.

(Illuzzi) “The real question is whether FairPoint, after it pays Verizon, after it meets the expectation of its stockholders, whether it will be able to deploy the technology necessary to make Vermont an E State.”

(Dillon) Governor Jim Douglas wants Vermont to have universal access to broadband Internet service by 2010. This “E state” initiative depends in part on FairPoint. That’s because the company has promised to continue Verizon’s plans to offer higher speed Internet to 80% of its service territory by that date.

Fairpoint Vice President Walter Leach says the company will meet that goal, and more.

(Leach) “The customers in the state of Vermont will be better off in the state of Vermont from a broadband accessibility perspective than they would if the transaction did not occur.”

(Dillon) Leach strongly disputes the Morgan Stanley report. He says the financial analyst got it wrong.

(Leach) “The analysis claims to be based upon Fairpoint’s newly released stand alone forecast. And that is just not true. There was no such Fairpoint forecast projecting how the company would perform if the merger was not approved.”

(Dillon) And Leach says, even if you assume the report was true, FairPoint will still produce $44 million in surplus cash next year – enough to pay a stock dividend.

FairPoint has to win approval from public utility commissions in all three states before the deal can go through. The state Public Service Board will review the company’s finances and its plans for new services in Vermont.

Leach says FairPoint will soon file testimony in the Vermont case that will detail its proposed broadband improvements. He says the company plans to use a more advanced technology than is being used by Verizon.

(Leach) “And it will be rolled out faster and to more locations than would otherwise occur if the merger did not happen. It’s a technology referred to as ADSL 2Plus. And it’s an Ethernet- based technology that effectively makes it more efficient than the system that’s currently being rolled out by Verizon.”

(Dillon) The FairPoint executive also says the company will add 600 jobs in the three state area over and above the people Verizon already employs. He says these new jobs are back-office positions such as billing and network operations which Verizon currently has located outside of the region.

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

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