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
nt shareholders. The companies expect to
complete the merger in the middle of next year.
