Maine Public Advocate Reaches Agreement With Fairpoint and Verizon on Sale of Verizon’s Operations in Maine, New Hampshire and Vermont
December 13, 2007
An agreement was reached early Thursday morning between the Maine Office of the Public Advocate and representatives of FairPoint and Verizon concerning a proposed sale of Verizon’s operations in Maine, NH and Vermont to FairPoint Communications.
The Public Advocate is charged with representing the interests of Maine consumers in utility regulatory matters.
In early November, the Public Advocate released an analysis of the proposed FairPoint-Verizon transaction that recommended approval of the transaction by the Maine Public Utilities Commission but only if the Commission imposed a list of 24 conditions on the transaction.
“Our goal all along has been to ensure the financial viability of the post-merger company and to make sure that Maine telephone customers receive high quality and expanded services,” said Public Advocate Richard Davies. “The settlement agreement will ensure better service, more broadband availability and lower rates.”
In the agreement reached today, FairPoint and Verizon agreed to major changes in their proposal that has earned the merger the endorsement of the Public Advocate.
The terms include:
- reducing the debt burden on FairPoint, Verizon will be contributing up to $235.5 million in additional working capital
- FairPoint will further reduce its debt by cutting its dividend payments by 35 percent (freeing up $49.7 million annually) and requiring the greater of $35 million or 90 percent of free cash flow be used to pay down debt
- restricting dividends and further acquisitions should FairPoint's debt to cash flow ratio exceed certain pre-determined levels
- requiring capital investments in Maine by FairPoint of no less than $47-48 million annually in the first three years
- greatly expanding FairPoint's commitment to broadband expansion in Maine through the investment of $57.5 million in the first five years, with a promise to reach 90 percent of all lines even if it costs more money
- FairPoint will adopt Verizon's current $15 per month DSL price with a two year contract, or $18 with a one year contract
- in resolution of a pending rate case, basic telephone rates will be reduced by $18 million annually, and with no rate increases for at least five years
- stepped up penalties if FairPoint fails to meet customer service quality standards
- protections for consumers by not allowing FairPoint to pass along higher capital costs because it is riskier or has higher debt cost than Verizon
“Verizon and FairPoint have come a long way during negotiations over their proposed transaction, and they deserve credit for being responsive to the needs of Maine telephone customers,” Public Advocate attorneys Bill Black and Wayne Jortner said. “Now we recommend that the PUC determine that they have moved far enough.”
The PUC was scheduled to deliberate on the case today. The hearing was postponed until Dec. 20 to give interested parties additional time to examine and comment on the settlement agreement.