FairPoint phone company files for bankruptcy due to Verizon spin-off scheme.

October 26, 2009

FairPoint phone company files for bankruptcy, Thanks Verizon! – Yahoo! News

( http://ping.fm/K8AWU )

FairPoint Communication Phone Company is Bankrupt and files for Bankruptcy protection

We all knew it was going to happen. Verizon should be held accountable for actions related to bankruptcies of Idearc Media, FairPoint, and Hawaiian Telecom!

By CLARKE CANFIELD, Associated Press Writer Clarke Canfield, Associated Press Writer

PORTLAND, Maine – FairPoint Communications Inc. had its work cut out when it grew sixfold overnight by buying Verizon Communications’ land line and Internet operations in three New England states. But the nation’s credit crisis and a bungled technology transfer made the task virtually impossible.

With a battered financial sheet and a tattered reputation, FairPoint filed for Chapter 11 bankruptcy protection on Monday, barely 18 months after becoming the dominant telecommunications company in Maine, New Hampshire and Vermont.

The bankruptcy filing was widely anticipated and fulfilled critics’ predictions that FairPoint was taking on more than it could handle when it bought the Verizon properties for $2.3 billion.

But nobody’s taking satisfaction in saying, “I told you so.”

“What good does it do us? We can say it, but we’re left here to do deal with it,” said Pete McLaughlin of the International Brotherhood of Electrical Workers, which represents FairPoint employees.

FairPoint, based in Charlotte, N.C., owns and operates phone companies in 18 states with a total of 1.65 million lines. Its largest holdings are in Maine, New Hampshire and Vermont.

The company voluntarily filed for bankruptcy after agreeing on a deal with key lenders that would lower its debt from $2.7 billion to $1 billion and significantly cut its interest expenses, CEO David Hauser said. The plan is subject to approval by the U.S. Bankruptcy Court in the Southern District of New York.

Hauser said the filing will not affect the company’s day-to-day operations or its efforts to expand its high-speed Internet network in northern New England.

“From a customer point of view, this is a nonevent,” he said.

Monday’s filing prompted the New York Stock Exchange to suspend trading in the company’s stock. The company was notified last month that its stock could be removed from the exchange because the price had fallen below $1 a share for 30 consecutive trading days.

Regulators and politicians said they would look out for the interests of FairPoint’s customers and workers. The regulatory boards in Maine and New Hampshire said they have hired bankruptcy specialists to help during the process. Staff members from the three states’ regulatory boards planned to meet with FairPoint’s management and staff on Monday.

“The creditors seem to be taken care of, but that doesn’t mean the consumers’ interests have been protected,” said Maine Public Advocate Richard Davies, who represents consumers.

Besides negotiating with banks and bondholders to restructure its debt, FairPoint has been asking its nearly 3,000 union employees in the three-state region for concessions in a cost-cutting move.

Union leaders, meanwhile, said FairPoint’s problems were caused by “crushing debt and an organizational chaos,” not by its work force.

When FairPoint first proposed buying Verizon’s land line and Internet assets in northern New England, opponents said FairPoint was too small to take on such a large network. At the time, FairPoint had 975 employees and about 300,000 access lines nationwide; Verizon had more than 3,000 employees and 1.6 million access lines in northern New England alone.

Davies said two events are largely to blame for the company’s unraveling.

After the purchase was approved by regulators in Maine, New Hampshire and Vermont, but before the acquisition was completed on April 1, 2008, FairPoint was hobbled by the Wall Street financial crisis, he said. To finance the deal, the company planned to issue bonds paying 8.125 percent but instead had to issue bonds that paid 13.125 percent — causing its interest payments to soar.

When the company switched from Verizon’s computer systems to its own network last winter, it was plagued with customer-service, order-fulfillment and billing problems. Those problems caused costs to go up and its customer base to go down.

“Two factors that are major contributors to this weren’t known to regulators at the time the deal was approved,” he said. “Hindsight is a wonderful thing and if we’d known all these things back then I’m sure there would’ve been a different decision.”

Meredith Hatfield, New Hampshire’s consumer advocate, said the challenge now will be advocating for customers’ interests and getting FairPoint to follow through on its commitments.

“Obviously ratepayers and customers of FairPoint potentially have a lot to lose,” she said.

FairPoint said it has about $46 million of cash on hand. It said it received commitments for a $75 million debtor-in-possession revolving credit facility while in bankruptcy.


Idearc Bankruptcy may not pass muster. Approval unlikely according to sources….

October 26, 2009

According to the Dow Jones Financial Information Services:

The New York private equity firm said if Idearc can’t settle its differences with creditors and confirm an exit plan at the December hearing, other parties should be allowed to propose alternative strategies for the company.

In its request, Idearc said it is making progress in talks with unsecured creditors. Even if the company, creditors and lenders can’t reach an agreement, it said the dispute is likely to be settled during a November trial of the lawsuit.

In the lawsuit, the unsecured creditors committee said JPMorgan Chase & Co., the agent for the lenders, failed to properly register certain copyrights. They say that means the lenders don’t hold a lien on Idearc’s most valuable assets, the intellectual property needed to print and distribute phone books.

Idearc was spun out of Verizon Communications Inc. in 2006. The company blamed the $9 billion in debt it took on as part of that transaction for its bankruptcy filing.

So, the real assets for Idearc are:

The name (lol)
idearclogo1

-the + 3000 “talented” and trained sales reps on salary
superpages_logo

Switchboard-logo

This logo is smaller for a reason.

This logo is smaller for a reason.

idearc corporate office hotel

So….. who owns the asset of the Verizon Yellow Pages name? If Idearc Media / Verizon Yellow Pages were let’s say “Being Sued for Executive Fraud” or being under investigation by the IRS for Verizon’s bankruptcy spin-offs??

In my opinion the entire spin-off of the company was a pretty bogus deal by Verizon. It stinks rotten. No offense to the fella who I have never met personally from Pepsi! He seems like a pretty funny guy! I especially love the motorcycle stunts for the national sales meeting in February during the announcement of the bankruptcy filing!

According to the Dallas Business Journal:

Phone directory publisher Idearc Inc. said Friday the U.S. Bankruptcy Court for the Northern District of Texas approved the company’s amended disclosure statement outlining the company’s plans for emerging from Chapter 11 bankruptcy.

Dallas-based Idearc said that under its proposed plan, the company’s total debt will be reduced from about $9 billion to approximately $2.75 billion of secured bank debt, with the remainder of the company’s current bank debt and bonds converted to new equity.

Scott Klein, Idearc’s CEO, said in a statement, “The court’s approval of the disclosure statement and its authorization to begin the process for soliciting approval of our plan, signals the latest step toward emergence from Chapter 11.”

Idearc was created in October 2006 when Verizon spun off its yellow pages and directories division into the standalone company. It was launched with $9.1 billion in long-term debt at its creation. Idearc and its subsidiaries filed for Chapter 11 bankruptcy protection in March.

The question of the day is: Did Verizon know that Idearc could not afford the debt burden when it spun the company off with 9.1 BILLION in debt??


So you prefer Google over getting ink on your fingers with the Yellow Pages…. it’s time to “OPT OUT” of Yellow Pages industry wasteful saturation distribution methods.

October 26, 2009

Saturation Distribution…………. it’s just WRONG!

Photo by Lulu Vision via Flickr
photo by Lulu Vision


It appears that the Public Relations folks at the major yellow pages directory companies are pushing folks on Twitter to use www.yellowpagesoptout.com to stop receiving copies of the printed yellow pages. Well…. TODAY is the day. I am going to call and opt out of getting the books since I no longer need to participate in “distribution surveys” for work. (I no longer work for Idearc Media / Verizon Yellow Pages & Superpages.com). Let’s see if I get anymore books.

Personally I believe that getting a phone book is a necessity for many people. I just believe it needs to be “opted in” instead of “opted out”. Although it appears the industry can afford to lobby to prevent anti solicitation and spam bills, it is apparent that consumers do not have a strong voice in the matter.

Many 3rd party websites exist where consumers are able to get involved in selecting what yellow pages media they want to receive or be “disturbed” by. Sites such as:

http://www.PaperlessPetition.org says:

New research by The Kelsey Group indicates that consumer local media preferences are in transition, influenced by demographic factors, including age, income and education. The younger and more educated and affluent consumers are, the more they tend to utilize online resources at the expense of traditional media.

For example, the survey revealed that just 44% of respondents between the ages of 18 and 34, and only 28% of teens said they would turn to print Yellow Pages first when looking for local listings. On the other hand, 47% of these respondents said their first choice would be search engines.

“There’s a very clear age factor,” said Kelsey Group analyst Neal Polachek. He added that as consumers who are most accustomed to using the Web begin to enter their 30s, when they have more disposable income and are making bigger purchases, so too will businesses in their local advertising. “All of a sudden, you’re looking for schools, you own a house, you’re looking for mortgages — big purchase decisions. Those people will never have had the built-in habit of picking up the print Yellow Pages.”[5]

This research illustrates the decreasing demand for printed directories and the increasing usage of search engines for local information. We should all be following the youth’s lead, not only because their methods are faster and more efficient, but to also help preserve our planet’s limited resources.

Help Stop the Waste!

WhitePages.com sponsored site www.banthephonebook.org says:

Did you know that up to 5 million trees are cut down each year to create the white pages phone book and that taxpayers are spending $17 million each year to have these books recycled? Even more surprising is that almost 75% of consumers are completely unaware of the environmental and financial impact in printing, delivering and recycling these books. Given that you likely use online directories, social networks and mobile phone applications to find the contact information you need, it simply does not make sense to have the white pages phone books forcefully delivered to us every year.

Of course the industry asks you to go to a site it created www.yellowpagesoptout.com to opt out of directory distribution. Many have said that the site does not work as it simply asks you to spend hours on the phone attempting to tell the publisher’s you do not want a book. It has also been found that DEX does a pretty good job of following consumer wishes and leaves a nice door hanger asking you to request a phone book if you opt out (kudos to Dex for doing what people ask).

With YellowPagesOptOut the industry is apparently asking consumers to make a choice of which phone book they do want to receive if any. Maybe the PR folks at Idearc need to state, “Opt Out of Phone Books you don’t want, keep the one with the SuperGuarantee“.

Yellow Pages Industry says Consumers have a Choice....

In my opinion saturation distribution methods are wrong. You see, before the existence of the internet folks needed phone books. It was almost a necessity. How do consumers stop getting copies of phone books? It is not with opting out or opting in… it is by not using the phone book, disposing of it, voice opinions about it, telling businesses that advertise in it you prefer they didn’t, and rewarding publishers who do as you ask. I believe that consumers in many areas of the United States still need phone books. Most of rural America needs the phone book. Unfortunately publishers do not care about providing books based on need. Around 2006 when Verizon Yellow Pages became Idearc Media the company ceased distribution of many rural area books in the state of Texas. Why? It was not as profitable to publish these books since ad costs for smaller markets was significantly less than larger ones and a lack of sales made it a challenge to achieve profitable margins. Smaller publishers seem to make profits and produce a better product in these areas (San Angelo Tx and Bryan-College Station consumers prefer the Area Wide Directory over the Verizon Yellow Pages). Maybe it is the one size fits all approach or the “unachievable” margins the big telco publishers are attempting to receive?

Regardless of how print publishers react to a change in consumer behavior (this change has been taking place since the birth of the internet…. it is not like they have not had enough warning to react) going forward, it is up to consumer’s and advertisers to stop receiving phone books. Publisher’s will continue to lobby our elected officials and will also continue with the “saturation distribution” method. I used to think this issue would fix itself in a “supply and demand” fashion, but it is apparent that supply/demand does not always work, especially when media ad costs may justify cost of distribution. The consumers that do not want the product are forced to get it because some consumers do use the product and advertisers profit from this.

I don’t think I am the only one that believes a yellow page “distribution by subscription” method would be a wise strategy. If you want to increase value, find out who really does use your product. In the hands of the right target market the yellow pages is a very powerful product. I have always told my clients that if you want to be the best website on the internet, become an authority. The best websites are subscribed to. The best magazines are subscribed to. The best TV shows are TIVO’d or subscribed to. The best phone books will also be requested and subscribed to. I would love to be an advertiser in a phone book were the consumer actually requested the product.

BTW, how much is a phone book worth to a recycling company? If I recall the amount of glue in the spine makes it a challenge to recycle.

Additional Yellow Pages Industry Facts

* North American Yellow Pages Print Distribution: 540 million directories
* Global Industry Revenue: $26 billion
* U.S. Industry Revenue: $14 billion
* Revenue from printed directories: 97%
* Revenue from online directories: 3%

There are over 7,000 different titles of Yellow Pages, including competing industry-specific, ethnic-targeted, and “underlay” or neighborhood-specific titles. There are no strict rules, other than market demand, limiting the number of Yellow Pages titles to be printed in a single market. For example, this year in Southern California, it is possible that a person could have over 10 Yellow Pages directories dropped on their doorstep from 10 different publishers. It is also noteworthy that with a distribution of 540 million, there are more directories dropped than the entire population of North America. This industry practice is called “saturation distribution.”

What is “Saturation Distribution”?

In the past, anyone with a landline automatically received a printed copy of the Yellow Pages. But today, with the landline exodus to mobile phones, and considering drops at large apartment buildings or corporate campuses, directory publishers use “Saturation Distribution” to ensure that enough printed copies are available.[1] This means that an over-estimated number of copies are dropped to ensure that everyone gets a copy. Even more waste.
The Biggest Players in the Yellow Pages Game:[2]

RANK MEDIA COMPANY NET DIRECTORY REVENUE
1 SBC Communications $3.8 Billion
2 Verizon Communications $3.6 Billion
3 BellSouth Corp. $2.0 Billion
4 Dex Media $1.7 Billion
5 Yellow Book USA (Yell Group) $1.1 Billion

If you want to share your thoughts directly with the Yellow Pages Association:
Yellow Pages Association (YPA)

Global Headquarters
Two Connell Drive, First Floor
Berkeley Heights, N.J. 07922-2747
(908) 286-2380
(908) 286-0620 (Fax)

Mr. Negley (Neg) Norton
President, Yellow Pages Association (YPA)
908 286-2385
Neg.Norton@ypassociation.org