Verizon Communications unveiled two major transactions that will see the U.S. operator sell off assets worth a total of $15.54 billion in order to fund recent spectrum purchases.
The company, which bought 181 licences worth $10.4 billion in the U.S. AWS-3 spectrum auction that closed last week, has agreed to sell local wireline operations serving customers in California, Florida and Texas to Frontier Communications for about $10.54 billion. The companies said they expect to complete the transaction in the first half of 2016.
Around 11,000 Verizon employees are expected to move over to Frontier as part of the deal. At the end of fourth-quarter 2014, these operations served about 3.7 million voice connections; some 2.2 million high-speed data customers, including approximately 1.6 million FiOS Internet customers; and about 1.2 million FiOS Video customers.
In a second transaction, Verizon will sell and lease mobile phone towers for around $5 billion to American Tower. That deal will see the tower construction company lease the rights to over 11,300 Verizon towers for an average term of about 28 years and buy around 165 towers. This transaction is expected to close by mid-2015.
Verizon also said it is returning a “significant amount of capital to its shareholders” through a $5 billion accelerated share-repurchase programme.
Verizon chairman and CEO Lowell McAdam said the transactions would further strengthen the operator&r squo;s focus on its core markets and return significant value to its shareholders
“Our long-standing strategy has been to consistently invest in our networks, improve our customers’ experience, and develop new products and services while delivering profitable growth,” McAdam added.
The move was broadly welcomed by Jefferies analysts, which said Verizon’s transactions to rationalize non-core assets should be viewed positively by equity and debt holders after the company spent $10.4 billion at the spectrum auction.
“The share repurchase resulting from asset sales is accretive to EPS, and modestly improves leverage,” the analysts said in a research note. “We raise our 2015 EPS estimate by 2% from $3.64 to $3.72.”
