Talk of a possible sale of FairPoint Communications has picked up recently, on the heels of a collective bargaining agreement that will make the company more attractive to prospective buyers, and recent comments by FairPoint's CEO.
Last week, during FairPoint’s first quarter earnings conference call, CEO Paul Sunu told investors and industry analysts: “We must consider mergers and acquisitions as either a seller or a buyer as part of our overall strategy.”
If it is sold, FairPoint would most likely be purchased by a larger telecommunications firm.
Despite FairPoint’s quarter after quarter losses, Barry Sine, a telecom analyst with Drexel Hamilton, a Wall Street financial services firm, says the company could be attractive to potential buyers.
“The crown jewel of FairPoint, and this is a very valuable asset, is their 18,000 mile fiber optic network across Maine, New Hampshire and Vermont,” says Sine.
The fiber network is at the heart of the side of FairPoint’s business that is growing.
In contrast to losing residential customers to other telephone and broadband providers, the company is gaining valuable enterprise business like wireless carriers, hospitals and state government that use FairPoint’s fiber network.
"The crown jewel of FairPoint, and this is a very valuable asset, is their 18,000 mile fiber optic network across Maine, New Hampshire and Vermont." - Barry Sine, telecom analyst with Drexel Hamilton
Sine says Connecticut-based Frontier Communications is the most likely buyer.
Frontier has operations in 28 states and more than 17,000 employees. Last fall Frontier took over AT&T’s land line operations in in Connecticut. Now it is in the process of acquiring Verizon’s land line services in California, Florida and Texas.
Sine says Frontier will likely wait until it has integrated those acquisitions before it takes a serious look at FairPoint.
“What we would be talking about would perhaps be the middle of 2017 before they have the management attention and time that it would take to acquire FairPoint,” he says.
Sine says two other companies might be interested in acquiring FairPoint: CenturyLink in Louisiana and Windstream Communications in Arkansas.
Both operate in rural markets around the country.
Sine says many of FairPoint’s largest shareholders are investors who purchased defaulted bonds when the company declared bankruptcy.
“Their envisioned exit has always been selling this company to another larger phone company,” he says.
If no buyer materializes, Sine believes FairPoint is in a position to continue to operate on its own now that it has a new contracts with organized labor.
A spokesman for the International Brotherhood of Electrical Workers in Vermont says the union is aware of speculation about a future sale of the company and would welcome the opportunity to be a partner with "a more successful business" than FairPoint.
Any sale of FairPoint would require the approval of state regulators.
