AT&T Inc. agreed to sell its Connecticut landline unit, including Internet and TV services, to Frontier Communications Corp. for $2 billion, letting the company focus on the more lucrative wireless business.
Frontier will get all of AT&T’s phone customers and U-verse television and broadband subscribers in the state, as well as satellite-TV users, the companies said in a statement today.
The move continues AT&T’s shift away from its roots as Ma Bell, the dominant provider of U.S. landline phone service. The Dallas-based company agreed to acquire Leap Wireless International Inc. earlier this year to add wireless customers, and it’s looking overseas for growth opportunities.
“AT&T has been trying to sell its rural wireline businesses for some time,” said Gerard Hallaren, an analyst with Janco Partners Inc. “It looks to me like Frontier cherry-picked a nice asset at a nice price from AT&T.”
AT&T fell 0.9 percent to $33.85 at the close in New York. Shares of Frontier -- a phone, Internet and television provider based in Stamford, Connecticut -- rose 8.6 percent to $4.78.
The business from today’s sale represents about $1.2 billion of AT&T’s annual revenue, or less than 1 percent of its $127.4 billion total in 2012. The portion of revenue that AT&T gets from its landline operations has fallen steadily over the past five years, from about 59 percent in 2007 to less than 47 percent in 2012.
The transaction, expected to be completed in the second half of 2014, gives Frontier 415,000 broadband connections and 900,000 voice customers in Connecticut. Frontier sees the acquisition boosting free cash flow per share in the first year, while creating $200 million in annual cost savings.
About 2,700 landline employees from AT&T’s operations in Connecticut will join Frontier, according to the statement.
AT&T is investing $14 billion over three years to improve its networks, aiming to fend off competition from Verizon Communications Inc. and cable providers such as Comcast Corp.
Lazard Freres & Co. advised Frontier’s independent board members, and JPMorgan Chase & Co. provided financial advice to Frontier.
The deal will need to be approved by the U.S. Department of Justice, the Federal Communications Commission, the Connecticut Public Utilities Regulatory Authority and other state regulatory agencies.