(3) Acquisitions:

The Verizon Acquisition

On April 1, 2016, Frontier acquired the wireline operations of Verizon Communications, Inc. in California, Texas and Florida for a purchase price of $10,540 million in cash and assumed debt (the Verizon Acquisition), with adjustments for working capital, pursuant to the February 5, 2015 Securities Purchase Agreement, as amended. As a result of the Verizon Acquisition, Frontier now operates these former Verizon properties, which included approximately 2.6 million total customers, 2.2 million broadband subscribers, and 1.2 million FiOS video subscribers as of April 1, 2016 (the CTF Operations).

Our consolidated statement of operations for the three and six months ended June 30, 2016 includes $1,282 million of revenue and $264 million of operating income related to the results of the CTF Operations.

The allocation of the purchase price presented below, which is preliminary and subject to change, represents the effect of recording the estimates of the fair value of assets acquired and liabilities assumed as of the date of the Verizon Acquisition, based on the total transaction cash consideration of $9,886 million. These current estimates will be revised in future periods for information that is currently not available to us, primarily related to certain legal and tax accruals and contingencies; accounts receivable; property, plant and equipment; customer list and other intangibles; other working capital “true-up” adjustments; deferred income tax assets and liabilities; pension assets and liabilities, as well as other assumed postretirement benefit obligations, pending completion of actuarial studies and the related transfer of pension assets. 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	$	391
Property, plant & equipment		7,693
Goodwill		2,032
Other intangibles - customer list		1,160
Other assets		89
Other current liabilities		(552)
Long-term debt		(544)
Other liabilities		(383)
Total net assets acquired	$	9,886

The Securities Purchase Agreement provides for a post-closing adjustment for both pension liabilities and pension assets. Frontier and Verizon have not finalized the results of these calculations. Such calculations will be completed in accordance with the terms of the Securities Purchase Agreement.

The following unaudited pro forma financial information presents the combined results of operations of Frontier and the CTF Operations as if the Verizon Acquisition had occurred as of January 1, 2015. The pro forma information is not necessarily indicative of what the financial position or results of operations actually would have been had the Verizon Acquisition been completed as of January 1, 2015. 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 Verizon Acquisition.



	(Unaudited)
	For the three months ended		For the six months ended June 30,
($ in millions, except per share amounts)	June 30, 2015		2016		2015

Revenue	$	2,779	$	5,322	$	5,549

Operating income	$	385	$	743	$	733

Net loss attributable to Frontier common shareholders	$	(43)	$	(96)	$	(120)

Basic and diluted net loss attributable to
Frontier common shareholders per share	$	(0.04)	$	(0.08)	$	(0.10)

During 2015, we completed our financing activities associated with the Verizon Acquisition, which included: 1) a private debt offering of $6,600 million of unsecured senior notes in September 2015, 2) the 2015 Credit Agreement (as defined below) for a senior secured delayed-draw term loan facility in August 2015 and 3) a registered offering of $2,750 million of preferred and common stock in June 2015. Net proceeds from these debt and equity offerings together with the proceeds received from the delayed draw term loan facility and cash on hand were used to fund the Verizon Acquisition and pay related fees and expenses.

The Connecticut Acquisition

On October 24, 2014, Frontier acquired the wireline properties of AT&T Inc. in Connecticut (the Connecticut Acquisition) for a purchase price of $2,018 million in cash, pursuant to the stock purchase agreement dated December 16, 2013, as amended.

Acquisition and Integration Costs

Acquisition costs include legal, financial advisory, accounting, regulatory and other related costs. Integration costs include expenses incurred to integrate the network and information technology platforms and to enable other integration initiatives.

Frontier incurred operating expenses related to the Verizon Acquisition and Connecticut Acquisition, as follows:


	For the three months ended June 30,				For the six months ended June 30,
($ in millions)	2016		2015		2016		2015

Acquisition costs:
Verizon Acquisition	$	21	$	2	$	23	$	35
Connecticut Acquisition		-		-		-		1
		21		2		23		36
Integration costs:
Verizon Acquisition		106		28		242		31
Connecticut Acquisition		-		5		-		25
		106		33		242		56
Total acquisition and
integration costs	$	127	$	35	$	265	$	92

We also invested $88 million and $19 million in capital expenditures related to the Verizon Acquisition during the six months ended June 30, 2016 and 2015, respectively. In connection with the Connecticut Acquisition, Frontier invested $19 million in capital expenditures during the six months ended June 30, 2015. In connection with the Verizon Acquisition, we will incur additional operating expenses and capital expenditures in 2016 related to integration activities.