FairPoint Delays Integration of Former Verizon Assets

FairPoint Communications Inc. (FRP), the company that recently bought Verizon’s operations in New Hampshire, Maine and Vermont, is now saying it won’t be able to complete the integration of the Verizon networks by November as initially planned. Instead, FairPoint recently announced, it now expects to reach that milestone by January.

According to FairPoint: “This decision was reached following a careful evaluation of the activities remaining to successfully complete the transition to about 60 new, fully integrated state-of-the-art systems which will replace the more than 600 systems currently being utilized by Verizon to support the acquired operations.”

Currently, FairPoint is paying Verizon $16.5 million monthly under its Transition Services Agreement (TSA). These payments decrease beginning in December. As a result of the extension, FairPoint will pay Verizon $16 million in December and Capgemini U.S. LLC, FairPoint’s lead integration partner, will be responsible for the January payment of $15.5 million. In exchange for the January payment, Capgemini is expected to receive shares of preferred stock of FairPoint with a liquidation preference equal to $15.5 million.

Of course, integrating Verizon’s network is just the tip of the expensive iceberg for FairPoint. You may remember that as part of the deal to acquire the Verizon assets, FairPoint announced a sweeping $44 million plan to create jobs and upgrade those rural networks to broadband using a combination of high-speed copper and fiber technologies. In light of the economic turmoil the country is facing, this effort now becomes a much tougher task. However, FairPoint continues to move ahead, having announced earlier this week that it will provide 100 percent broadband coverage to customers in half of its Vermont exchanges by the end of 2010.

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