VERIZON WIRELESS SALE: ; Deal requires total system conversion; 617,000 access lines, billing system and all else will be converted to Frontier's operations

Deal requires total system conversion 617,000 access lines,billing system and all else will be converted to Frontier'soperations

By GEORGE HOHMANN

DAILY MAIL BUSINESS EDITOR

The biggest West Virginia telecommunications deal in the pastdecade - Verizon's sale of its West Virginia wire line business toFrontier Communications - also will be the mother of all systemconversions.

Verizon announced in May it is selling its local wire linebusiness in West Virginia and 13 other states to Frontier for about$8.6 billion.

In the other states, the operations will be sold with theirexisting systems, said Frontier spokesman Steve Crosby. Thoseoperations will be put into a new company called SpinCo and couldcontinue to operate that way for a number of years. They can beconverted to Frontier's systems "in our own time frame, at our ownpace," he said.

West Virginia is the exception. Everything in the state thatVerizon is selling to Frontier - its 617,000 access lines, itscustomer billing system, employee records, switches, real estate,and everything else - will be converted to Frontier's systems andname by the date the transaction closes, Crosby said.

"We're taking a very large system, Verizon, carving away WestVirginia and converting it to Frontier," he said. "The plan, interms of critical issues and the cutover plan for West Virginia, ishundreds of pages.

"It's a huge project," he said. "We have an integration team onour side that cuts across every function within Frontier - thingslike internal legal, external legal, regulatory, legislative,billing, carriers, engineering."

One example: "How do you deal with 911 systems? Who do you needto talk to? How do you test it? We're going through this withVerizon to make sure no stone is left unturned.

"We have planning sessions, call after call, to make sure we'regetting the information we need, getting it out to Verizon, and thatVerizon has the information they need to share with us," Crosbysaid. "We shake hands one way, they shake hands another. It goesback and forth."

Frontier already has 143,000 access lines in West Virginia andabout 261 employees here. Verizon has about 2,000 employees in WestVirginia. When the deal is complete, West Virginia will beFrontier's largest market.

Unlike Verizon deals in New England and Hawaii, which left thepurchasers muddling through and either broke or nearly so, Frontierwon't be converting Verizon's West Virginia customers to new out-of-the-box systems.

"Frontier's current footprint (in West Virginia) will meld intoVerizon's," Crosby said. "We have scalable systems, which means thatin West Virginia and elsewhere our systems have enough capacity tobring in all of the customer information, all billing information.We have existing systems in place. We have gone through a number ofother conversions in the past, basically in preparation forsomething as large and terrific as this."

Crosby said the conversion "is like if you or I were to buy acondo or home and would have to sign documents at escrow. Imaginethat times 10,000. This is a very large project. We're making surewe will have all of the i's dotted and t's crossed."

The number of people involved in the conversion is "many - notfive or 10," he said. "We have a team that is focused on WestVirginia. We feel comfortable that we'll be able to have all of thatdone in the proper time. The customer should not see any impact atall."

Byron Harris, the state Public Service Commission's consumeradvocate, said his staff has asked both companies for lots ofinformation, which it will be digesting over the next few weeks.

"Nobody has ever attempted this before," Harris said. The entiretransaction "involves 4.8 million customers in 14 states.

"Even though they have these two separate treatments of theentities - SpinCo and West Virginia - you have to imagine thattripling the size of the company overnight won't be an easy task,"Harris said. "They say they can run them (the other state systems)forever under these old setups. They'll still be responsible for allof the problems that occur in those 13 states. And there's going tobe a learning curve. Not to say they can't do it. You plan for theworst and hope for the best.

"Our primary focus is going to be, does Frontier have a goodgrasp on the quality-of-service problems that Verizon has and whatit is going to take to remedy those? Does Frontier have thefinancial wherewithal to solve those quality-of-service problems? Ifthe other 13 states have similar problems to what Verizon WestVirginia has, they're taking on a major problem.

"We're also going to focus on a number of very day-to-daycustomer-oriented issues, like if you're on a Verizon bundle withlong distance and DirecTV, how's Frontier going to take care ofthose bundles?

I don't know if they have a contract with DirecTV, for example,"Harris said. "I think they use Dish Network. Are they going tocontract with DirecTV or just go to Dish Network? That will make alot of people unhappy."

Last year the state Public Service Commission opened aninvestigation after receiving hundreds of complaints about Verizon'swire line service. In December Verizon agreed to invest $11 millionand increase its installation and maintenance force by at least 49technicians to improve service.

During a three-hour hearing in May, Verizon said it has madestrides in reducing customer complaints. The Public ServiceCommission has scheduled another progress report in November.

"We will be reviewing that (service quality) in the context ofthis Frontier case," Harris said on Monday. "I think it's obviouslysomething we want to focus on, that Frontier is able to remedy thesequality-of-service problems."

Harris said the fact Frontier plans to convert Verizon'soperations in West Virginia using scalable systems does appear to bea distinction from what happened with Fairport in New England andCarlyle Group in Hawaii.

"That provides some comfort but, to the best of my knowledge,have they scaled it up like this before? We'll see," Harris said.

Frontier has said it expects to realize $500 million in savingsfrom the deal, mostly through improved systems. Crosby said, "Forexample, if you have one billing system for all of these states thenyou're able to get rid of other billing systems you currently have.If you can find better routes for pushing calls through the network,you save money. I heard our chief financial officer say on May 13that the bulk of savings over time will be done through technology."

Harris said the West Virginia Public Service Commission;potentially the commissions in 13 other states; and the FederalCommunications Commission must approve the deal. West Virginia'scommission will hold hearings in Charleston from Jan. 12-14.

Crosby said the transaction cannot close before April 30, 2010.

Harris said, "At some point next spring, if they've received allof those approvals, customers should pay close attention to theirbills when the transition occurs and maybe pay more attention tobill inserts, which would provide information on what is going tohappen."

Contact writer George Hohmann at business@dailymail.com or 304-348-4836.