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Verizon to buy NEW YORK -- Verizon Communications, battling a major strike and disappointing profits, announced plans today to merge its digital subscriber line high-speed Internet operations with NorthPoint Communications Group Inc., an upstart provider of the DSL service.
DSL provider
NorthPoint
The deal will affect isle
subscribers and comes
amid lower earnings
and an ongoing strikeFrom staff and wire reports
Verizon Hawaii DSL subscribers, like their counterparts across the country, will become NorthPoint subscribers.
"Because we're going to merge our DSL operations with NorthPoint, NorthPoint is going to become another household word here in Hawaii as our provider of DSL service," Keith Kamisugi, a Verizon Hawaii spokesman, said today.
Kamisugi would not say how many DSL subscribers Verizon has in Hawaii, where the company competes with Oceanic Cable's Road Runner Internet service via cable lines.
Verizon Hawaii, formerly GTE Hawaiian Tel, began offering the DSL service via phone lines about two years ago.
The agreement calls for Verizon to merge its DSL operations into NorthPoint and invest $800 million in the combined business in exchange for a 55 percent stake in NorthPoint.
Verizon also will pay $350 million in cash, or about $2.50 a share, to NorthPoint shareholders, who will swap their shares for stock in the new publicly traded NorthPoint.
San Francisco-based NorthPoint had a market value of $1.98 billion at yesterday's close.
The deal, unveiled today as a strike by 87,200 Verizon employees entered a third day, came as Verizon posted second-quarter results below Wall Street forecasts and warned of more profit struggles next year.
Talks between two unions and Verizon, the company formed in June by the merger of Bell Atlantic and GTE Corp., snagged over job-security issues yesterday, but resumed in Washington today.
The strike affects 25 million local phone customers in 12 states and Washington D.C. It does not affect the company's Hawaii operations.
In trading on the New York Stock Exchange, shares of Verizon closed off $5.50 at $42.37 1/2, a loss of 11.5 percent. NorthPoint fell 75 cents to $14.25 on the Nasdaq market.
The new alliance with NorthPoint, similar to one formed between Prodigy and Verizon rival SBC Communications Inc., will make NorthPoint the primary provider of high-speed Internet access for Verizon.
DSL is a technology used to overcome the capacity constraints of a copper phone wire to deliver speedier Web services.
Together, Verizon and NorthPoint serve more than 600,000 DSL lines over in an area covering 63 million homes and businesses.
Liz Fetter, NorthPoint president and chief executive, will continue to lead NorthPoint as CEO after the merger.
Pending regulatory approvals, the companies expect to complete the deal in mid-2001.
In a separate announcement today, Verizon said it expects to earn $2.90 to $2.94 a share in 2000.
It expects earnings-per-share growth of 9.5 percent to 11.5 percent in 2001, and at least 12 percent in 2002.
The company said earnings will be hurt by the pending purchases of NorthPoint and the communications software business OnePoint Communications Corp.
Verizon also is continuing to digest its GTE purchase and is spending more to improve and expand data-transmission capabilities.
New York-based Verizon said second-quarter profit rose 5.1 percent on growth in wireless, data, long distance and international markets.
Verizon said profit from operations, excluding a pension gain, rose to $1.97 billion, or 72 cents a share, from $1.87 billion, or 67 cents a share, in the year-earlier period. Including the gain, the company earned 81 cents a share.
Net income for the quarter rose to $4.9 billion, or $1.79 a share, from $1.9 billion, or 70 cents.
The Associated Press, Star-Bulletin reporter Russ Lynch and Bloomberg News contributed to this report.