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.


Are you paying for your competitor’s Verizon Yellow Pages advertisement?

October 8, 2009

As I said before, I left Idearc recently after almost 10 years with the company. I have notices lately that it has gradually been turning into a hire ’em and fire ’em style culture. The company has been churning media consultants and managers. It is obvious that they want sales. I understand that it is a sales organization.

(I edited this article to add the following supportive quote on my “opinion”)
I am offering a quote from Andrew Rudin’s comment titled: “On My Honor, as a Salesperson . . .”: Why Sales Ethics Matter

Which business risk represents the greatest threat to shareholder value? Natural disasters? Terrorism? Product defects? Piracy? Patent infringement? Lack of ethical boundaries?

If you answered anything but the last choice, think again. The massive collapse of market capitalization at Tyco, Worldcom, and Enron underscores the grave dangers posed to shareholder value when employees lack an ethical compass. The cumulative decline in market capitalization resulting from fraud at these three companies was $136 billion, according to Public Citizen’s Congress Watch.

These scandals originated in the executive suite and required an ecosystem of compliant people to execute. What about ethical problems that originate elsewhere? What happens when ethical violations spiral from what are euphemistically called “aggressive sales practices?” In 1998, ethical violations at Prudential Insurance became so pervasive that the company’s management eventually estimated its liability from the pending class-action lawsuit at $2 billion. Among the voluminous courtroom testimony from the case was this nugget: “Your judgment gets clouded out in the field when you are pressured to sell, sell, sell.”

The company is allowing sales fraud to take place by Hispanic sales reps in the Texas area for Spanish yellow pages products and also paying these reps higher commissions to boot.  (before you throw stones at me for stating this: If this subject were taken to court, I am more than 100% positive that it can be attested that what I am saying is true, and I have documentation to prove such) I think Idearc needs to read this article from Harvard Business School.

Idearc has to keep the print business and is forced to make it work. If it doesn’t work Idearc will not survive as a company. It is too horrible at servicing the internet business and offering the level of service it can offer with a print product. It is theoretically impossible for them to retain the same margin going forward as print rates start dropping and so does advertiser count. Idearc has lost many clients during the recession and it will be a challenge to win them back. I am also sure that they will also consider wiping existing client debt away (which is going to be great for sales reps commissions) to increase the amount of opportunity for sales results once they emerge from bankruptcy. Reminds me of the class action law suit regarding credit limits. Idearc will keep paying commissioned sales consultants for .com and ppc sales when the majority of the money goes to Google and Yahoo but declare the revenue not based on the management fee for PPC but the actual client budget (investors correct me if I am wrong?). Seriously, do you really think that Superpages.com is more than 10% of local search? Although, I do see value in both it’s print and online offering, your typical search marketing “uneducated” Idearc sales consultant is just in it to make a buck from a company that wants to get paid with unachievable margins. Yet in my professional opinion they have a few media consultants at the company who are worth more than weight in gold. Folks that have experience that even Harvard Business School could not teach. Working with so many different industries and on different forms of marketing, promotion, message and ad buying is a huge asset. Just my .02 cents.

If you need further visual proof of my statement on sales fraud… just grab a copy of the SuperDirect Postcard decks for the Greater Dallas area…. why are there so many Hispanic surname painting, remodeling, flooring, concrete, and landscaping companies in the decks? They are not making money if they keep allowing the credit limit to be given so freely in an attempt to show positive sales results while telling Wall Street that it was having issues with Receivables. Company motto going forward needs to be reward good paying clients for quality leads. Stop forcing paying clients to foot the bill for non-paying clients advertisements. Why should a reputable company lose calls to a no-pay business? It is hard enough competing in today’s marketplace without all the fraud. I think Idearc doesn’t need but 5-10 clients per category. Have a set rate per lead. Build a call center to screen the leads. Offer existing worthy clients premium opportunities. Kill all the free listings!

It was also apparent that Idearc wants a culture that rewards calling the same clients over and over with the same old spill. Reps are told to disregard notes that state “do not call” or NITC (not interested in telephone call). Now, I don’t know what Idearc’s upper management thinks about this and whether it is just local sales managers, but the thought of beating a client into a sale does not do much to resolve the issues it companies have with client churn. But hey….. according to some clients they just want your credit card number!

I will also mention that I have clients that are making serious ROI on advertising in the product. It does work. It just takes the right ad message, the right ad price, and the right position in the product. Media buyers need to step in and start buying ads for clients vs commissioned sales reps who have no clue what the business can and can not afford. Transparency in pricing will go a long way to helping the yellow pages industry. Make pricing more like Google and give up on this idea of a “affluent homeowner” using and urban scoped directory that takes a zillion lbs of paper. Heck, I remember someone actually stating that if you stacked the Greater Dallas Yellow Pages one on top of the other it would reach the outer atmosphere…. if this is true…. No wonder Ed Kohler at http://www.thedeets.com is going nuts!

Cheers,
Mike Stewart
(former Idearc Media Consultant speaking out)
http://www.dallasSEOguru.com