Frontier Communications 2009 Annual Report Download - page 15

If the assets contributed to Spinco by Verizon are insufficient to operate the Spinco business, it could
adversely affect the Company’s business, financial condition and results of operations.
Pursuant to the distribution agreement executed in connection with the Verizon Transaction, Verizon will
contribute to Spinco defined assets and liabilities of its local exchange business and related landline activities in
the Spinco territory, including Internet access and long distance services and broadband video provided to
designated customers in the Spinco territory. The merger agreement provides that all the contributions will be
made so that the Spinco business (other than the portion conducted in West Virginia) is segregated from
Verizon’s other businesses at least 60 days prior to the closing of the spin-off and merger. However, the
contributed assets may not be sufficient to operate all aspects of the Spinco business and the Company may
have to use assets or resources from Frontier’s existing business or acquire additional assets in order to operate
the Spinco business, which could adversely affect the Company’s business, financial condition and results of
operations.
Pursuant to the distribution agreement, Frontier has certain rights to cause Verizon to transfer to it any
assets required to be contributed to Spinco under that agreement that were not contributed as required. If
Verizon were unable or unwilling to transfer those assets to the Company, or if Verizon and Frontier were to
disagree about whether those assets were required to be contributed to Spinco under the distribution agreement,
the Company might not be able to obtain those assets or similar assets from others without significant costs or
at all.
The Company’s business, financial condition and results of operations may be adversely affected
following the merger if it is not able to obtain consents to assign certain Verizon contracts to Spinco.
Certain wholesale, large business, Internet service provider and other customer contracts that are required
to be assigned to Spinco by Verizon require the consent of the customer party to the contract to effect this
assignment. Verizon and Frontier may be unable to obtain these consents on terms favorable to the Company or
at all, which could have a material adverse impact on the Company’s business, financial condition and results
of operations following the merger.
Regulatory agencies may delay approval of the Verizon Transaction, fail to approve it, or approve it in a
manner that may diminish the anticipated benefits of the merger.
Completion of the Verizon Transaction is conditioned upon the receipt of certain government consents,
approvals, orders and authorizations. While Frontier and Verizon have obtained certain, and intend to pursue
vigorously all other, required governmental approvals and do not know of any reason why they would not be
able to obtain the necessary approvals in a timely manner, the requirement to receive these approvals before
completion of the Verizon Transaction could delay the completion of the Verizon Transaction. Any delay in the
completion of the Verizon Transaction could diminish the anticipated benefits of the Verizon Transaction or
result in additional transaction costs, loss of revenues or other effects associated with uncertainty about the
transaction. Any uncertainty over the ability of the companies to complete the Verizon Transaction could make
it more difficult for Frontier to maintain or to pursue particular business strategies. In addition, until the
Verizon Transaction is completed, the attention of Frontier management may be diverted from ongoing
business concerns and regular business responsibilities to the extent management is focused on obtaining
regulatory approvals.
Further, governmental agencies may decline to grant required approvals, or they may impose conditions on
their approval of the Verizon Transaction that could have an adverse effect on the Company’s business,
financial condition and results of operations. Any amounts paid, payable or forgone by Verizon pursuant to
orders or settlements that are issued or entered into in order to obtain governmental approvals in the Spinco
territory that are required to complete the Verizon Transaction will increase the aggregate number of shares of
Frontier common stock to be issued pursuant to the merger agreement, and any such increase could be
significant. If any governmental agency declines to grant any required approval for the Verizon Transaction,
then the Verizon Transaction may not be consummated. In addition, conditions imposed by governmental
agencies in connection with their approval of the Verizon Transaction (such as service quality or capital
expenditure requirements) may restrict the Company’s ability to modify the operations of its business in
response to changing circumstances for a period of time after the closing of the merger and/or its ability to
expend cash for other uses, including for payment of dividends.
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES