FairPoint Communications provides local and long-distance phone services, which account for nearly half of sales, as well as broadband Internet access and cable TV to residential and business customers. The company also offers phone and Internet packages for business customers. It serves about 1.3 million subscribers through more than 30 local-exchange carriers in 18 US states. FairPoint concentrates largely on rural and small urban markets located mainly in the Northeast and the Midwest, but the company's service areas extend to the South and the Northwest. FairPoint emerged from Chapter 11 bankruptcy in 2011.
Burdened with more than $2 billion in debt, the company filed for Chapter 11 bankruptcy in 2009. Its restructuring efforts reduced debt by nearly two-thirds, to $1.0 billion from $2.8 billion. FairPoint also secured a $75 million revolving credit line to be used for working capital.
FairPoint incurred its debt largely by expanding its service area with the acquisition of the New England landline assets of Verizon Communications for about $2.3 billion in 2008. The purchase increased the size of the company by adding nearly 2 million residential and business access lines and related operations located in Maine, New Hampshire, and Vermont. As part of the transition service agreement, FairPoint was limited in the modifications it could make to Verizon service bundles until 2009. As landline accounts have dwindled industry-wide, The company has since lost many of those subscribers.
To counter this trend, FairPoint has tried to reposition itself for growth in the region by expanding the availability and reliability of its high-speed Internet service, the only growing segment of the company's business, as well as building out of its VantagePoint fiber Internet Protocol-based network. FairPoint is targeting underserved communities in northern New England to fuel adoption of its broadband services in the region.
The fruits of this strategy have yet to be fully realized. The company's revenue declined for the fourth year in 2011, while its losses grew by nearly 50% over 2010. Aside from a shrinking subscriber base, FairPoint is faced with decreased consumer spending caused by the economic downturn, increased competition from national brands and mobile carriers, and the detrimental effects of its bankruptcy proceedings as contributing to its declining revenue. To cut costs the company continues to shrink its staff and consolidate operations.
Additionally, FairPoint agreed to sell its unprofitable payphone business, which operates about 4,000 phones, to Pacific Telemanagement Services in 2012. The divestiture comes belatedly, as many leading carriers have already shed their payphone units, which fell victim to the ubiquitous mobile phone. – less