(3) The Transaction:

On July 1, 2010, Frontier acquired the defined assets and liabilities of the local exchange business and related landline activities of Verizon Communications Inc. (Verizon) in Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia and Wisconsin and in portions of California bordering Arizona, Nevada and Oregon (collectively, the Territories), including Internet access and long distance services and broadband video provided to designated customers in the Territories (the Acquired Business). Frontier was considered the acquirer of the Acquired Business for accounting purposes.

We are accounting for our acquisition of approximately 4.0 million access lines from Verizon (the Transaction) using the guidance included in ASC Topic 805. We incurred approximately $143.1 million, $137.1 million and $28.3 million of acquisition and integration related costs in connection with the Transaction during the years ended December 31, 2011, 2010 and 2009, respectively. Such costs are required to be expensed as incurred and are reflected in “Acquisition and integration costs” in our consolidated statements of operations.

The allocation of the purchase price of the Acquired Business is based on the fair value of assets acquired and liabilities assumed as of July 1, 2010, the effective date of the Transaction. Our assessment of fair value was final as of June 30, 2011. In the fourth quarter of 2011, the Company recorded an immaterial non-cash revision to the acquired liability balance for postretirement benefits other than pensions (OPEB) based upon corrected information obtained regarding the treatment of certain plan provisions. The revision resulted in a decrease to the acquired OPEB liability of $125,445, a decrease in goodwill of $78,754 and an increase in net deferred tax liabilities of $46,691.

The final allocation of the purchase price presented below represents the effect of recording the final fair value of assets acquired, liabilities assumed and related deferred income taxes as of the date of the Transaction, based on the total transaction consideration of $5.4 billion. The following allocation of purchase price includes revisions to the preliminary allocation that was reported as of December 31, 2010, primarily for goodwill, deferred taxes, current liabilities and other liabilities.

($ in thousands)
Total transaction consideration:				$	5,411,705
Current assets	$	454,513
Property, plant & equipment		4,407,676
Goodwill		3,695,397
Other intangibles – primarily customer list		2,532,200
Other noncurrent assets		75,092
Current liabilities		(483,118	)
Deferred income taxes		(1,476,813	)
Long-term debt		(3,456,782	)
Other liabilities		(336,460	)
Total net assets acquired	$	5,411,705

The fair value of the total consideration issued to acquire the Acquired Business amounted to $5.4 billion and included $5.2 billion for the issuance of Frontier common shares and cash payments of $105.0 million. As a result of the Transaction, Verizon stockholders received 678,530,386 shares of Frontier common stock. Immediately after the closing of the Transaction, Verizon stockholders owned approximately 68.4% of the combined company's outstanding equity, and existing Frontier stockholders owned approximately 31.6% of the combined company's outstanding equity.

The following unaudited pro forma financial information presents the combined results of operations of Frontier and the Acquired Business as if the Transaction had occurred as of January 1, 2009. The pro forma information is not necessarily indicative of what the financial position or results of operations actually would have been had the Transaction been completed as of January 1, 2009. In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project, the future financial position or operating results of Frontier. The unaudited pro forma financial information excludes acquisition and integration costs and does not give effect to any estimated and potential cost savings or other operating efficiencies that could result from the Transaction.

	For the year ended December 31,
	2010		2009
($ in millions, except per share amounts)

Revenue	$	5,652	$	6,071
Operating income	$	1,192	$	1,373

Net income attributable to common shareholders of Frontier	$	324	$	433

Basic and diluted net income per common share attributable to common shareholders of Frontier	$	0.33	$	0.44