(3) Acquisitions:

The Connecticut Acquisition

On October 24, 2014, pursuant to the stock purchase agreement dated December 16, 2013, as amended, the Company acquired the wireline properties of AT&T Inc. (AT&T) in Connecticut (the Connecticut Acquisition) for a purchase price of $2 billion in cash, excluding adjustments for working capital. Following the Connecticut Acquisition, Frontier now owns and operates the wireline business and fiber optic network servicing residential, commercial and wholesale customers in Connecticut (the Connecticut operations). The Company also acquired the AT&T U-verse® video and DISH satellite TV customers in Connecticut. See Note 7 for further discussion related to financing the Connecticut Acquisition.

In connection with the Connecticut Acquisition, the Company incurred $142 million of operating expenses, consisting of $15 million and $127 million of acquisition and integration costs, respectively, and $116 million in capital expenditures related to the Connecticut Acquisition during 2014. The Company incurred $10 million of acquisition costs related to the Connecticut Acquisition during the fourth quarter of 2013.

Our consolidated statement of income for the year ended December 31, 2014 includes $216 million of revenue and $38 million of operating income related to the results of the Connecticut operations from the date of its acquisition on October 24, 2014.

The allocation of the purchase price of the Connecticut operations was based on the fair value of assets acquired and liabilities assumed as of October 24, 2014, the effective date of the Connecticut Acquisition. Our assessment of fair value is preliminary, and will be adjusted for information that is currently not available to us, primarily related to the tax basis of assets acquired, certain accruals and contingencies, pension assets and liabilities, as well as other assumed postretirement benefit obligations.

The fair value amounts recorded for the allocation of the purchase price as of October 24, 2014 are preliminary and certain items are subject to change. The most significant items include: legal and tax accruals; accounts receivable; property, plant and equipment; customer list intangibles; other working capital “true-up” adjustments; deferred income tax assets and liabilities, pending AT&T providing us with tax values for the assets and liabilities of the Connecticut operations; and pension and other postretirement liabilities, pending completion of actuarial studies and the related transfer of pension assets.

The preliminary allocation of the purchase price presented below represents the effect of recording the preliminary estimates of the fair value of assets acquired, liabilities assumed and related deferred income taxes as of the date of the Connecticut Acquisition, based on the total transaction consideration of $2,018 million. These preliminary estimates will be revised in future periods and the revisions may materially affect the presentation of our consolidated financial results. Any changes to the initial estimates of the fair value of the assets and liabilities will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill.



($ in thousands)

Current assets	$	73,631
Property, plant & equipment		1,450,057
Goodwill		867,638
Other intangibles - customer list		590,000
Other assets		336
Current liabilities		(101,590)
Deferred income taxes		(647,525)
Other liabilities		(214,760)
Total net assets acquired	$	2,017,787

The total consideration exceeded the net estimated fair value of the assets acquired and liabilities assumed by $868 million, which we recognized as goodwill. This goodwill is attributable to strategic benefits, including enhanced financial and operational scale, market diversification and leveraged combined networks that we expect to realize. Of this amount, goodwill associated with the Connecticut Acquisition of $75 million is deductible for income tax purposes.

The securities purchase agreement provides for a post-closing adjustment for working capital, pension liabilities transferred and pension assets. Frontier and AT&T have not finalized the results of these calculations. If an adjustment is made for the working capital “true-up,” the purchase price allocation will be revised.

The following unaudited pro forma financial information presents the combined results of operations of Frontier and the Connecticut operations as if the Connecticut Acquisition had occurred as of January 1, 2013. The pro forma information is not necessarily indicative of what the financial position or results of operations actually would have been had the Connecticut Acquisition been completed as of January 1, 2013. 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 Connecticut Acquisition.



($ in millions, except per share amounts)	(Unaudited)
	For the year ended December 31,
	2014		2013

Revenue	$	5,775	$	6,011

Operating income	$	985	$	1,049

Net income attributable to common
shareholders of Frontier	$	191	$	83

Basic and diluted net income per
common share attributable to
common shareholders of Frontier	$	0.19	$	0.08