Frontier Communications 2009 Annual Report Download - page 12

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active in our local communities will make our customers more loyal, and will help us generate additional, and
retain existing, customer revenue.
Additional Information on Verizon Transaction
Pursuant to the Verizon Transaction, Spinco will merge with and into Frontier, and Frontier will survive as
the combined company conducting the combined business operations of Frontier and Spinco. Spinco will hold
defined assets and liabilities of the local exchange business and related landline activities of Verizon in
Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina,
Washington, West Virginia and Wisconsin, and in portions of California bordering Arizona, Nevada and
Oregon (collectively, the Spinco territory), including Internet access and long distance services and broadband
video provided to designated customers in the Spinco territory (collectively, the Spinco business). Immediately
prior to the merger, Spinco will be spun off to Verizon stockholders. The merger will result in Frontier
acquiring approximately 4.2 million access lines, based on access lines of the Spinco business as of December
31, 2009, and certain related business assets from Verizon. The Spinco business generated revenues of
approximately $4.4 billion for the year ended December 31, 2008, the last full year of available revenue for
Spinco, and $3.1 billion for the nine months ended September 30, 2009. Following the merger, the separate
existence of Spinco will cease and the combined company will continue to operate under the Frontier name.
The forgoing transactions are collectively referred to as the “Verizon Transaction.” The completion of the
Verizon Transaction is subject to a number of conditions.
Our stockholders have approved proposals related to the Verizon Transaction at a special meeting of
stockholders on October 27, 2009. No vote by Verizon stockholders is required in connection with the Verizon
Transaction; Verizon, as the sole stockholder of Spinco, has already approved the Verizon Transaction. The
completion of the Verizon Transaction is subject to a number of conditions, including availability of financing
on terms that satisfy certain requirements, receipt of regulatory approvals and other customary closing
conditions. As of February 26, 2010, we have received approval for the Verizon Transaction from state
regulatory commissions in Arizona, California, Nevada, Ohio and South Carolina. Commission hearings have
been completed in all of the four remaining states where we expect regulatory approval to be required (Illinois,
Oregon, Washington and West Virginia) and we have reached settlement or an agreement with most of the
intervening parties in all of those remaining states. We have also received, as of such date, all of the required
video local franchise approvals for the Verizon Transaction subject to the satisfaction of certain conditions.
Verizon has received a favorable ruling from the IRS regarding the tax consequences of the Verizon
Transaction which was a condition to the Merger Agreement. As of February 26, 2010, none of the conditions
imposed in the approval orders or settlements (which have generally focused on local rate stability; service
quality metrics and reporting, capital investment (including commitments to expand broadband availability),
pre-funding certain broadband expansion into restricted cash accounts at closing, and periodic reporting of
certain operational and financial information) are expected to have a material impact on our plans to operate the
Spinco properties.
Segment Information
We currently operate in only one reportable segment.
Financial Information about Foreign and Domestic Operations and Export Sales
We have no foreign operations.
General
Order backlog is not a significant consideration in our business. We have no material contracts or
subcontracts that may be subject to renegotiation of profits or termination at the election of the Federal
government. We hold no patents, licenses or concessions that are material.
10
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES