MONTPELIER, Vt. - Vermont regulators rejected FairPoint Communications' proposed $2.7 billion buyout of Verizon Communications' landlines in northern New England.
In a decision that pulls the plug -- for now -- on the three-state deal, the Vermont Public Service Board denied the petition by FairPoint Communications, of Charlotte, N.C., on the grounds it was too risky.
"The Board found that FairPoint had not demonstrated that it would be financially sound as it seeks to operate the newly-acquired territories in Vermont, Maine and New Hampshire -- a service territory that has five times the number of access lines as Fairpoint presently has," the Board said in a release.
The company would have to borrow $2.5 billion to complete the transaction, and the debt service on that amount could exert "significant financial pressure," the Board said.
But the board said it could approve the merger, subject to a series of conditions, and it invited FairPoint to submit new proposals that address the risks.
Rose Cummings, a spokeswoman for FairPoint, cast the rejection as "just a procedural bump," and Polly Brown, Verizon's president for Vermont, noted the invitation to the companies to revise their proposals.
FairPoint wants to take ownership of Verizon's 1.6 million access lines and Internet service in northern New England. Verizon would retain its wireless phone operations in the region.
Mike Spillane, business manager for the International Brotherhood of Electrical Workers Local 2326, which represents Verizon workers in Vermont and opposed the sale, said the union's concern with the proposal was the same as the Public Service Board's.
"They did not have enough money to run the state as it should be run," Spillane said. "Where is it going to come from?"
David O'Brien, commissioner of the Vermont Public Service Department, which represents ratepayers, said he felt FairPoint and Verizon could give the board a new proposal soon.
"We remain open to the potential for a modified proposal that would better meet the needs of Vermont consumers, as outlined in the board's order," O'Brien said at a Montpelier news conference.
Regulators in each state have to approve the deal, and they have spent months poring over documents and hearing testimony about its would-be impact.
Vermont's action doesn't necessarily kill the sale, according to Meredith Hatfield, New Hampshire's consumer advocate.
"I think what they're saying is, 'It's rejected as proposed, but here are the conditions,'" she said.
New Hampshire, where the Public Utilities Commissioners did not think "it was in the public interest as proposed," also is open to considering a new version of the deal, she said.
The companies have said they want to close the deal Jan. 31.
Unions representing Verizon employees didn't sign off on a proposed deal in Maine, and regulators there are to take up the issue Wednesday.
Vermont State Sen. Vincent Illuzzi, who represents the rural northeastern part of the state, said he feared customer service could suffer if FairPoint took over the landlines under the deal as proposed.
Fairpoint shares fell $1.19, or 7.6 percent, to $14.46.
