Frontier to Buy Verizon Lines

Verizon Communications on Wednesday took another step away from its century-old heritage as a company that provides telephone service over copper wires. It agreed to sell divisions that offer service to 4.8 million phone lines in 14 states to Frontier Communications for $3.3 billion in cash and $5.2 billion in Frontier stock.

The deal will triple the size of Frontier, a collection of rural phone companies that is based in Stamford, Conn. Verizon will wind up owning at least two-thirds of Frontier’s shares, in a tax-free spinoff.

The move allows Verizon to concentrate on its wireless business and on serving large companies. The company says that after the deal, only 15 percent of its revenue will come from residential customers. And 70 percent of those will be in neighborhoods where the company is replacing its copper wires with fiber optic cables that carry television programs, Internet service and, almost incidentally, voice calls under the FiOS brand.

The local phone business, in fact, has been contracting quickly as customers shift to phone service offered by cable companies or simply to using their cellphones. Verizon, which will have 30.3 million phone lines left after the deal, lost 10.2 percent of its lines last year in the regions it is selling. Frontier, by contrast, lost only 7.2 percent of its lines.

Maggie Wilderotter, the chief executive of Frontier, said in an interview that the company could thrive in sparsely populated areas. “Rural is our business,” she said.

Ms. Wilderotter added that Verizon had installed equipment to offer high-speed Internet service over copper wires — a technology called DSL — to only 60 percent of the areas being sold. Frontier, by contrast, hopes to offer DSL service to more than 90 percent of customers. It can afford to do that in part because it charges high prices. Ms. Wilderotter said Frontier has average revenue of $40 a month per customer for Internet service, the highest in the industry.

John F. Killian, Verizon’s chief financial officer, said his company did not choose to invest in expanding DSL in those rural areas because it had better options.

“Capital is finite,” he said. “We felt the appropriate place to put our capital was into our FiOS footprint and our wireless footprint.”

Mr. Killian added that the company had not decided what to do about the 30 percent of its remaining home customers that are outside of areas where the company plans to offer FiOS. For now, it offers bundles that include satellite television provided by DirecTV. But if costs come down, it might install fiber to those homes, or perhaps new technology that can deliver higher Internet speeds and video over copper wires.

Verizon has been selling off many of its local phone operations outside of the population centers in the Northeast. But in a conference call with investors, Ivan G. Seidenberg, Verizon’s chief executive, said it did not expect further deals.

“This completes the picture of where we take the local business,” he said.