RealTime IT News

Verizon Gets to the Point

Verizon Communications Inc. and NorthPoint Communications Group Inc. decided Tuesday was a great day to merge.

The combination of DSL businesses allows NorthPoint to significantly improve access to much-needed capital. As part of the agreement, Verizon will contribute its DSL assets and $800 million in cash to the new high-speed business venture.

Verizon plans to distribute $350 million of this cash to current NorthPoint shareholders. On a per share basis, the pay out is estimated to be $2.50 per share. Verizon will also invest $450 million to fund the merged business plan.

As a result of its investment of cash and other assets, Verizon takes a 55 percent ownership in NorthPoint, which will continue to report financial results and trade as a separately listed public company.

The merger melds the DSL networks, product suites, strategic partnerships, customers and personnel of NorthPoint and Verizon to form a dedicated entity focused on accelerating broadband services nationwide.

Lawrence Babbio, Verizon vice chairman and president, said the new company would expand broadband choice for customers and provide a superior alternative to cable.

"This deal combines complementary assets, Verizon's position in the consumer market and NorthPoint's presence with business customers, to provide the scale to fuel growth and deliver the full benefits of high-speed connections," Babbio said.

Liz Fetter, NorthPoint president and chief executive officer said its deal with Verizon creates a new NorthPoint and a new national DSL leader.

"The fundamentals of the DSL business are only improving, and NorthPoint has significantly strengthened its position as a long-term competitor and innovator in this market," Fetter said.

Both companies reported strong digital subscriber line growth during the second quarter. NorthPoint highlighted double-digit revenue growth in DSL sales, noting that it produced a 22 percent increase in second quarter revenue over first quarter results. Specifically, NorthPoint reaped more than $24.4 million during the period ending in June and $20 million for the quarter that ended in March.

For its part, Verizon's DSL milestones included adding 71,000 new subscribers in the second quarter.

The business by-product that merged Bell Atlantic Corp. with GTE Corp. currently operates more than 220,000 revved up copper lines, a 47 percent increase from the end of the first quarter. Verizon's wholesale business also provides access to nearly 2.9 million switched access lines and 541,500 unbundled loops.

The merging of DSL businesses means that a potentially powerful national DSL baby is born, set to make high-speed data and advanced voice service deployment its mission in life.

Rosy reviews aside, NorthPoint's network expansion also produced a net loss in the second quarter totaling more than $112 million. Its network buildout extended DSL services to 14 new markets. NorthPoint is currently operational in 99 U.S. metropolitan markets.

The number of NorthPoint DSL subscribers grew 50 percent accounting for more than 62,000 subscribers. The number of homes and businesses passed increased during the quarter to approximately 41 million, up from 36 million in March.

NorthPoint anticipates that the combined businesses will have more than 600,000 lines on a pro forma basis as of the end of the year.

NorthPoint's merger with Verizon requires regulatory approval from the Federal Communications Commission, Department of Justice, various state commissions, as well as NorthPoi