AT&T’s $2 billion sale of its Connecticut wireline...

AT&T’s $2 billion sale of its Connecticut wireline operations to Frontier Communications (CD Dec 18 p9) shouldn’t have a “material impact” on AT&T’s free cash flow, Credit Suisse said in a research note Tuesday. The assets being sold generate roughly $1.2 billion of AT&T’s annual revenue, which is less than 1 percent of the telco’s total sales, the report said. “While the deal in itself has little impact on AT&T’s financials, we view the move to monetize these fixed line assets as a small positive, as we believe the capital could be used to ramp Project VIP.” Project Velocity IP is AT&T’s plan to invest $14 billion in upgrades to its wireless and fiber network (CD Nov 8/12 p11). The transaction is “attractive” for Frontier, said Andrew Spinola, analyst at Wells Fargo, in a research note Tuesday. “This is a significant transaction, but FTR has experience with these types of transactions and should be well-positioned to manage the process,” Spinola said. “The transaction is also financially attractive as it improves the payout ratio, creates $200MM in synergy opportunities, and increases the scale of the business,” he said. UBS expects Frontier to implement its “local engagement and simplified pricing plans” in Connecticut to drive penetration higher in residential and small and medium enterprises, said analysts Batya Levi and John Hodulik in a research note Tuesday. “We believe wireless backhaul will be a growth driver” of revenue and free cash flow, “as most of the towers had already been upgraded,” while regulatory revenue remains relatively stable, said the UBS analysts.