FairPoint Weighs Sale or Merger
FairPoint Communications announced last week it had another net loss in the first quarter, despite saving $680.3 million on retirement benefits through its new collective bargaining agreement.
The first-quarter earnings report is FairPoint’s first major financial announcement since company officials signed a new collective bargaining agreement in February with 1,700 union workers in northern New England.
Under the new contract, which runs through Aug. 4, 2018, the company’s workers in northern New England agreed to join a cheaper health care plan, lost unlimited paid sick leave benefits, received lower short-term disability benefits and agreed not to include new employees in the company’s pension plan.
The deal with workers puts the telecommunications corporation in a good position for a merger and acquisition deal, industry analysts say.
The news of the potential sale and disappointing profits comes in the middle of an ongoing Public Service Board investigation into FairPoint for what the state’s top ratepayer advocates say is substandard service quality. Hearings start on Sept. 16.
Compared to the first quarter of 2014, FairPoint’s revenue numbers declined in four major categories: $3.9 million in voice services, $1.9 million in access, $900,000 in data and Internet services; and $200,000 in “other services.”
Operating expenses and net losses were up, while capital expenditures were down. The company was down to $10.3 million in cash at the end of March, down from $37.6 million at the end of December.
Paul Sunu, the chief executive officer of FairPoint, announced the first-quarter numbers in a conference call. He said the company is at a “turning point.”
“We must consider mergers and acquisitions as either a seller or a buyer as part of our overall strategy,” Sunu said. “This exploration will be done carefully and methodically.”
In anticipation of the bleak numbers released Wednesday, the price of FairPoint stock dropped on the morning of May 6 to a one-month low. The stock, which is held largely by mutual funds, is back to nearly $19 a share. Earnings per share is around negative $5.
FairPoint has not had a positive annual net income since 2011, and has been hemorrhaging assets, according to financial statements.
The company’s dismal numbers are also not just a reflection of its business dealings in Maine, New Hampshire and Vermont.
FairPoint is based in North Carolina and offers telecommunications services to retail and wholesale customers in 17 states in total, according to spokesperson Angelynne Beaudry, who declined to comment further.
Sunu said the company is in a good position since acquiring more Enhanced 911 contracts with different states.
In Vermont, the company is on track to be Vermont’s sole Enhanced 911 provider starting on July 31, now that the state has settled a legal dispute with its former contractor, Intrado Inc.
The company also generated $23 million from Ethernet services for businesses, which both the company and the Vermont Department of Public Service say has been a “bright spot” for the company.
