NEW YORK: Shares of Frontier Communications rose 5% after the telecom company said it was issuing more shares to buy Verizon’s wireline assets and the stock was upgraded by an analyst who sees growth stemming from the deal.
In upgrading Frontier to “buy” from “neutral,” James Moorman of DA Davidson anticipated that the previously announced deal to buy Verizon’s wireline assets will raise Frontier’s “proforma revenue” to about $11.7 billion next year.
In the first quarter, Frontier’s revenue rose 19% year-over-year to $1.37 billion.
The stock (FTR) was up 26 cents as of Wednesday afternoon to $5.42.
Frontier revealed the details of its financing plans for buying Verizon’s assets — an offering of $750 million in equity and $1.75 billion in convertible preferred stock.
Frontier announced the expansion plan in February, which calls for paying $10.54 billion to Verizon for its wireline assets in California, Texas and Florida. They include 3.7 million phone customers, 1.2 million FiOS TV customers and 2.2 million Internet accounts.
“We expect continued improvement throughout the year and still see the (Verizon) deal as favorable,” Moorman wrote.
