FairPoint Communications 2013 Annual Report Download - page 39

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fiber reach into more communities across the region. The IP/MPLS network architecture of our Next Generation Network allows
us to provide Ethernet, transport and other IP-based services with the highest level of reliability at a lower cost of service. This
fiber network also supplies critical infrastructure for wireless carriers serving the region as their bandwidth needs increase, driven
by mobile data from smartphones, tablets and other wireless devices. As of December 31, 2013, we provide cellular transport,
also known as backhaul, through over 1,300 mobile Ethernet backhaul connections. We have fiber connectivity to more than 1,000
cellular telecommunications towers in our service footprint.
Executive Summary
Our executive management team is focused on our 'four pillar' strategy of improving operations, changing the regulatory
environment, transforming and growing revenue and aligning our human resources. Our mission is to provide reliable
communications services with outstanding customer support across the 17 states we serve. During fiscal year 2013, we continued
to make substantial progress on our 'four pillar' business strategy to continue our transformation from a traditional telephone
company into a provider of advanced communications services.
Access lines have historically been an important element of our business. Communications companies, including FairPoint,
continue to experience a decline in access lines due to increased competition from CLECs, wireless carriers and cable television
operators, increased availability of alternative communications services, including wireless and VoIP, and challenging economic
conditions. Our objective is to transform our revenue by continuing to add advanced data products and services such as Ethernet,
high capacity data transport and other IP-based services over our Next Generation Network in addition to HSD services, to minimize
our dependence on voice access lines. We will continue our efforts to retain customers to mitigate the loss of voice access lines
through bundled packages, including video and other value added services.
Over the past few years, we have made significant capital investments in our Next Generation Network to expand our
business service offerings to meet the growing data needs of our customers and to increase broadband speeds and capacity in our
consumer markets. We have also focused our sales and marketing efforts on these advanced data solutions. Specifically, within
the last couple of years, we built and launched high capacity Ethernet services to allow us to meet the capacity needs of our business
customers as well as supply high capacity infrastructure to our wholesale customers. These advanced data services are our flagship
product and are laying the foundation not only for new business but also for additional IP-based voice services in the future.
Additionally, we believe the bandwidth needs of cellular backhaul will continue to grow with the continued adoption of
bandwidth-intensive technology. We believe that our extensive fiber network, with over 16,000 miles of fiber optic cable, including
over 1,000 cellular telecommunications towers currently served with fiber, puts us in an excellent position to grow our revenue
base as demand for cellular backhaul services increases. We expect to see demand increase on existing fiber connected towers
where we would provision or expand mobile Ethernet backhaul connections or construct new fiber routes to cellular
telecommunications towers.
Coupled with recent regulatory reform in the states of Maine, New Hampshire and Vermont that will serve to promote fair
competition among communication services providers in the region, we believe that there is a significant organic growth opportunity
within the business and wholesale markets given our extensive fiber network and IP-based product suite, combined with our
relatively low market share in these areas.
Our collective bargaining agreements with the IBEW and the CWA in Northern New England cover approximately 1,800
employees in the aggregate and expire in August 2014. We expect to begin good faith negotiations for successor collective bargaining
agreements with our labor unions well prior to expiration. We cannot predict the outcome of these negotiations at this time. See
"Item 1A. Risk Factors—A significant portion of our workforce is represented by labor unions and therefore subject to collective
bargaining agreements, two of which, covering approximately 1,800 employees, expire in August 2014. If we are unable to
renegotiate these agreements prior to expiration, employees could engage in strikes or other collective behaviors, which could
materially adversely impact our business, financial condition, results of operations, liquidity and/or the market price of our
outstanding securities."
February 2013 Refinancing
On the Refinancing Closing Date, we completed the Refinancing of the Old Credit Agreement Loans. In connection with
the Refinancing, we (i) issued $300.0 million of Notes in a private offering exempt from registration under the Securities Act
pursuant to the Indenture that we entered into on the Refinancing Closing Date and (ii) entered into the New Credit Agreement,
dated as of the Refinancing Closing Date. The New Credit Agreement provides for the $75.0 million New Revolving Facility,
including a sub-facility for the issuance of up to $40.0 million in letters of credit and the $640.0 million New Term Loan. On the
Refinancing Closing Date, we used the proceeds of the Notes offering, together with $640.0 million of borrowings under the New
Term Loan and cash on hand to (i) repay principal of $946.5 million outstanding on the Old Term Loan, plus $7.7 million of