(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 $2.0 billion in cash. 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 Company also acquired the AT&T U-verse® video and DISH® satellite TV customers in Connecticut.

In connection with the Connecticut Acquisition, the Company incurred $26 million of operating expenses, consisting of $1 million and $25 million of acquisition and integration costs, respectively, and $19 million in capital expenditures during the six months ended June 30, 2015. The Company incurred $30 million of operating expenses, consisting of $1 million and $29 million of acquisition and integration costs, respectively, and $42 million in capital expenditures during the six months ended June 30, 2014.

Our consolidated statement of operations for the six months ended June 30, 2015 includes $528 million of revenue and $47 million of operating income related to the results of the Connecticut operations.

The allocation of the purchase price presented below represents the effect of recording the 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 current estimates will be revised in future periods for information that is currently not available to us, primarily related to the tax basis of assets acquired, pending AT&T providing us with tax values for the assets and liabilities of the Connecticut operations; certain legal and tax accruals and contingencies; pension assets and liabilities, as well as other assumed postretirement benefit obligations, pending completion of actuarial studies. The revisions may 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 millions)

Current assets	$	74
Property, plant & equipment		1,455
Goodwill		883
Other intangibles - customer list		570
Current liabilities		(98)
Deferred income taxes		(647)
Other liabilities		(219)
Total net assets acquired	$	2,018

The stock purchase agreement provides for a post-closing adjustment for pension liabilities transferred and pension assets. Frontier and AT&T have not finalized the results of these calculations. Such calculations will be completed in accordance with the terms of the stock purchase agreement.

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, 2014. 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, 2014. 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 may result from the Connecticut Acquisition.



($ in millions, except per share amounts)	(Unaudited)		(Unaudited)
	For the three months ended		For the six months ended
	June 30, 2014		June 30, 2014

Revenue	$	1,455	$	2,918

Operating income	$	249	$	494

Net income	$	37	$	73


Basic and diluted net income per share	$	0.03	$	0.07

The Verizon Transaction

On February 5, 2015, we entered into an agreement with Verizon Communications Inc. (Verizon) to acquire Verizon’s wireline operations that provide services to residential, commercial and wholesale customers in California, Florida and Texas for a purchase price of $10.54 billion in cash and assumed debt (the Verizon Transaction), with adjustments for working capital. Upon completion of the pending Verizon Transaction, Frontier will operate Verizon properties which included 3.7 million voice connections, 2.2 million broadband connections, and 1.2 million FiOS® video connections as of December 31, 2014. Subject to regulatory approval, the transaction is expected to close in the first half of 2016.

The Company incurred $66 million of operating expenses, consisting of $34 million of acquisition costs and $32 million of integration costs, related to the pending Verizon Transaction during the six months ended June 30, 2015. We also invested $19 million in capital expenditures related to the Verizon Transaction during the six months ended June 30, 2015.

Frontier has received a commitment for bridge financing from J.P. Morgan, Bank of America Merrill Lynch and Citibank associated with the Verizon Transaction. Separately, Frontier has also issued $2.75 billion in equity for the purpose of financing the pending Verizon Transaction. See Notes 8 and 9 for further discussion.

Other Acquisition

During the quarter ended June 30, 2015, we completed the acquisition of a network services company for total cash consideration of approximately $16 million, of which $13 million was attributed to goodwill. The impact of this acquisition on Frontier’s results of operations was not material.