FairPoint more attractive to buyers with new labor pact
PORTLAND, Maine (AP) — FairPoint Communications said it needed to bring costs and benefits into sync with competitors in the telecommunications industry. By doing just that in a new labor pact, the company has made itself more attractive to potential buyers, an analyst and workers say.
Workers said during a four-month strike in northern New England that the company was positioning itself for potential sale, and a Wall Street analyst said shareholders are pressing for one.
"Shareholders are beating the drums. They want to sell this company now," said Barry Sine, who monitors the company for Drexel Hamilton, a New York-based brokerage firm. "The unions, there's no love lost with this management team. The unions would like a new owner as well."
The North Carolina-based company, however, insisted that it is building its business in Maine, New Hampshire and Vermont — not preparing itself to be taken over by another company.
"We are focusing on building a platform for growth so we can continue to enhance our service for customers," spokeswoman Angelynne Amores Beaudry said.
More than 1,700 workers began returning to their jobs this week after ratifying a tentative agreement reached during negotiations overseen by federal mediators.
Workers went on strike in October after the company began imposing terms of its "final offer" that froze workers' pensions and required them to contribute to health care costs for the first time. It also eliminated health insurance for new retirees and allowed the company to hire outside workers.
The new contract allows the hiring of outside contractors with restrictions and lets workers keep their defined benefit pension plan with reduced contributions. Workers will contribute to health care costs but at a lower level than originally proposed. New retirees will get stipends to help pay for insurance.
The workforce knew it had to make concessions for the struggling company.
But Don Trementozzi, president of the Communications Workers of America Local 1400 in Portsmouth, New Hampshire, said the company seemed fixated on improving its books instead of focusing on customers.
"The brand has put a sour taste in the mouths of customers," he said. "We're going to go back to work and do everything we can to make this company profitable. But the brand, the name, suffered greatly in this. I don't know if you can recover without a sale."
It was unclear how much financial damage was done during the strike.
Some customers like John Bouchard in Robbinston, Maine, decided to switch to other high-speed Internet providers after becoming fed up by the inability of FairPoint's customer service department to resolve problems during the strike.
On Wednesday, while waiting to get his new service installed, Bouchard had to leave his home office and drive through a snowstorm to find Internet access. "It's very frustrating," he said.
If the company sold today, it would fetch somewhere in the range of $25 to $30 per share, or about $780 million, but potential suitors also would have to take on nearly a billion dollars in debt from a company that has yet to post a quarterly profit since buying Verizon's landline business in northern New England in 2007, Sine said.
Potential buyers include Connecticut-based Frontier Communications, which announced a month ago that it was buying Verizon's landline business in Texas, California and Florida, along with Arkansas-based Windstream and Louisiana-based CenturyLink, he said.
Mike Reed, FairPoint's president in Maine, said the company is focused on being competitive, not finding suitors.
"We have a responsibility to our customers, to our shareholders. We need to run the company as profitably as we can, to provide the best service that we can provide. That's what we do," he said. The union's contention that FairPoint fought to cut worker benefits just to make itself attractive to buyers "is a stretch," he said.