Frontier may be set to become the fifth largest ILEC if its deal to purchase Verizon`s rural lines meets final state regulatory approvals, but in the meantime cable operators are wasting no time poaching customers that are concerned that the acquisition will cause more pain than pleasure.
Given the back office and operations issues that both Hawaiian Telcom and FairPoint had in acquiring Verizon`s lines, consumer fears about the Frontier/Verizon deal aren`t unjustified. Frontier CFO Don Shassian admitted that cable competitors are playing to consumer`s fears.
"There are certain markets where the competition has been taking advantage of the situation and saying `Verizon is leaving, so come back to the cable company,`" he said during the Bank of America and Merrill Lynch Credit Conference in New York. "It`s difficult for Verizon to do an ad campaign to talk for us, and likewise, we can`t go into the marketplace and advertise because we don`t have regulatory approvals yet, and that`s sort of punching regulators in the chest, which you don`t want to do."
Regardless of consumer advocate concerns, Frontier believes it will be able to get the remaining state regulatory approvals it needs to complete the merger by Q2 2010. Upon completion, Frontier will face even more cable competition. In addition to Time Warner Cable, Frontier will have to deal with an aggressive Comcast which is present in approximately 33 percent of the new territories it is purchasing.
Of course, Frontier`s biggest challenge will be in transitioning the network and back office systems from Verizon in 13 states into its own fold. To avoid the issues that drove FairPoint into bankruptcy, Shassian said they will take their time with that process.
