Frontier Corporation's Merger with ALC Communications Bolsters its Credit Rating

Strategic Insights -

Frontier Corporation has announced a merger with ALC Communications, a holding company of long distance reseller Allnet Communications, valued at $1.8 billion. As a result, Frontier's credit rating has been reaffirmed at "A" (Single-A) by Duff & Phelps Credit Rating Co. The merger positions Frontier as the fifth-largest long distance company in the nation, with improved financial performance and potential cost savings of $40 million annually.

Key Takeaways:

  • The merger between Frontier Corporation and ALC Communications is valued at $1.8 billion and positions Frontier as the fifth-largest long distance company in the nation.
  • ALC Communications' holding company, Allnet Communications, had revenues of $570 million in 1994 and has improved its financial performance significantly over the last few years.
  • Frontier Corporation had more than $300 million of cash on hand at December 31, 1994, and intends to eliminate its debt shortly after the combination.
  • The acquisition will increase Frontier's exposure to the higher-risk long distance industry, with approximately 70% of its revenues derived from long distance services following the merger.
  • The RBOCs' entry into the interLATA long distance business may impact Frontier's markets, which are primarily focused on residential and small- to medium-sized business customers.
  • Frontier's nonregulated operations include a long distance business, a telecommunications equipment and service provider, and a cellular operating partnership interest in a joint venture with NYNEX and Bell Atlantic.

Statistics:

  • The merger is valued at $1.8 billion.
  • ALC Communications' holding company, Allnet Communications, had revenues of $570 million in 1994.
  • Frontier Corporation had more than $300 million of cash on hand at December 31, 1994.
  • The acquisition will result in potential cost savings of $40 million annually.
  • Following the merger, Frontier's revenues from long distance services will increase to approximately 70% of its total revenue.

Sources:

  • Duff & Phelps Credit Rating Co.
  • ALC Communications Corporation
  • Frontier Corporation
  • Allnet Communications