Frontier Communications 2013 Annual Report Download - page 18

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with uncertainty about the transaction. In addition, until the AT&T Transaction is completed, the attention of
Frontier management may be unnecessarily diverted from ongoing business and regular business
responsibilities.
Further, governmental agencies may decline to grant required approvals, or they may impose conditions on
their approval of the AT&T Transaction that could have an adverse effect on the Company’s business, financial
condition and results of operations. If certain governmental agencies decline to grant any required approval for
the AT&T Transaction, the AT&T Transaction may not be consummated. In addition, conditions imposed by
governmental agencies in connection with their approval of the AT&T Transaction (such as service quality or
capital expenditure requirements) may restrict the Company’s ability to achieve anticipated synergies, revenues
and cash flows.
The stock purchase agreement contains provisions that may discourage other companies from trying to
acquire Frontier.
The stock purchase agreement for the AT&T Transaction contains provisions that may discourage a third
party from submitting a business combination proposal to us prior to the closing of the AT&T Transaction that
might result in greater value to our stockholders than the AT&T Transaction. The stock purchase agreement
provides that we may not sell all or substantially all of our assets unless the buyer assumes in writing our
obligations, including the payment of the purchase price, under the stock purchase agreement. This would
represent an additional cost for a potential third party seeking a business combination with us.
Our stock price may be adversely affected if we are unable to consummate the AT&T Transaction.
If the AT&T Transaction is not completed for any reason, the trading price of Frontier’s common stock
may decline to the extent that the market price of the common stock reflects positive market assumptions that
the AT&T Transaction will be completed and the related benefits will be realized. Frontier may also be subject
to additional risks if the AT&T Transaction is not completed, including:
•significant costs related to the transaction, such as legal, accounting, filing, financial advisory, and
integration costs that have already been incurred or will continue up to closing. The Company currently
expects that it will incur approximately $225 million to $275 million of costs related to acquisition and
integration activities in 2014;
•significant interest expense will be incurred if Frontier completes the financing of approximately $1.9
billion prior to closing; and
•potential disruption to the business of Frontier and distraction of its workforce and management team.
The pendency of the AT&T Transaction could adversely affect the business and operations of Frontier
and the acquired business.
In connection with the pending AT&T Transaction, some customers of the acquired business may delay or
defer decisions or may end their relationships with AT&T prior to completion of the AT&T Transaction or with
the Company after the AT&T Transaction closes.
Risks Related to Our Business
The risks discussed below in this section refer to the “Company” for ease of reference. The risks apply to
us as a standalone entity before the AT&T Transaction is completed, will continue to apply to us if the AT&T
Transaction is not completed for any reason and will also apply to the combined company assuming the AT&T
Transaction closes.
We will likely face further reductions in voice customers, switched access minutes of use, long distance
revenues and federal and state subsidy revenues, which could adversely affect us.
We have experienced declining voice customers, switched access minutes of use, long distance revenues,
federal and state subsidies and related revenues because of economic conditions, increasing competition,
changing consumer behavior (such as wireless displacement of wireline use, e-mail use, instant messaging and
increasing use of VoIP), technology changes and regulatory constraints. We will likely continue to experience
reductions in the future. The factors referred to above, among others, are likely to cause our local network
17
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES