FairPoint Communications Inc.FRCMQ

Morningstar Rating

Stock Research and Analysis

by Michael Hodel, CFA

Unable to reach a deal with its senior note holders, FairPoint has been forced to file for bankruptcy court protection. As a result, the firm's shares will almost certainly end up worthless.

The acquisition of Verizon's northern New England assets in 2008 transformed FairPoint into a regional giant. Read more

Bulls Say

Although the acquired Verizon assets have been neglected, a large portion of this territory faces relatively modest competition, which should give FairPoint time to improve networks and win favor with customers.

Because FairPoint is late to the game in northern New England, it will be able to deploy advanced technologies at lower prices than were available even a couple of years ago. Read more

Bears Say

Massive operational problems have pushed FairPoint to the brink. The firm has filed for bankruptcy, most likely wiping out shareholders.

Comcast CMCSA and Time Warner Cable TWC, the two largest cable operators in the nation, serve a large portion of northern New England. The companies have tried to poach FairPoint's customers who are confused or frustrated with the transition of lines and billing services over from Verizon.

The northern New England territories are among the worst-performing rural phone assets in the nation. Read more

Strategy

The firm is investing heavily in northern New England to expand high-speed Internet access availability and increase available speeds. These improvements are intended to at least match the offerings of cable rivals in an effort to win high-speed Internet access customers and better preserve the firm's base of phone customers. Read more

Management

Gene Johnson cofounded the company in 1991; in 2008, he announced his intention to retire. David Hauser was appointed chairman and CEO in June 2009, filling Johnson's role effective July 1. We think the timing of Johnson's departure is odd, given the firm's operational struggles. Read more

Profile

FairPoint is the seventh-largest local telephone firm in the United States, following its acquisition of Verizon's northern New England assets. It operates in 18 states serving 1. Read more

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