(Host) Just after Labor Day, the Public Service Board begins hearings on the sale of Verizon’s northern New England operations. FairPoint Communications of North Carolina has put together a $2.7 billion deal for the business. But the Public Service Board needs to decide if that’s in the public interest.
VPR’s Ross Sneyd reports:
(Sneyd) The board’s decision will hinge largely on FairPoint’s financing: Can the company handle such a large purchase? Under the agreement, FairPoint would spend one billion in cash and take on another $1.7 billion in debt.
Those terms worry the workers at Verizon. They’re opposing the sale to FairPoint. Mike Spillane is the business manager of the electrical workers union.
(Spillane) "FairPoint does not have enough money to make this deal come true. Even Morgan Stanley and a couple of the other big financial power houses have questioned what’s going on here."
(Sneyd) FairPoint says the union has it wrong. Executive Vice President Walter Leach compares the way the deal’s been structured to a home mortgage. He points out that most prospective homeowners put down just 10-20 percent of their home’s purchase price, and then finance the rest.
(Leach) "We’re putting 37 percent down in the form of equity and the 63 percent in the form of debt. And that results in a very conservative capital structure that allows us to have a projected cash-flow cushion each and every year."
(Sneyd) FairPoint’s checkbook balance is such an important part of the equation in this deal because of commitments it’s made. The company says it’s committed to expanding access to high-speed broadband computer service. FairPoint says it will make all the connections that Verizon promised – and extend to even more regions around the state.
But state government has concerns about FairPoint’s ability to make good on its promises – and on Verizon’s. The Public Service Department has been critical of Verizon for not moving more aggressively to get broadband access to more of the state.
Public Service Commissioner David O’Brien says the Douglas administration opposes the Verizon-FairPoint deal in its current form. But he says the sale will be acceptable if the board imposes conditions and timetables.
(O’Brien) "We’re not going to sign off a new carrier coming in and simply perpetuating that same result. We want a standard upheld that we expect all along, whether it’s Verizon or it’s FairPoint or anyone else."
(Sneyd) O’Brien says he believes FairPoint is open to amending the deal to it would be acceptable. Fairpoint also has to persuade its stockholders to go along.
For VPR News, I’m Ross Sneyd.