Verizon leaves NorthPoint at the altar

NEW YORK - Verizon last week ended its merger agreement with DSL provider NorthPoint Communications, citing NorthPoint's deteriorating financial position and business operations as primary causes.

NorthPoint and Verizon announced Aug. 7 that Verizon would purchase a 55% interest in NorthPoint and that the firms would merge DSL operations.

Early last month, NorthPoint had restated its third-quarter earnings downwards to reflect that some of its service provider customers would be unable to pay for NorthPoint's services.

NorthPoint's shares closed at 59 cents on Thursday, down from the stock's 52-week high of $34.75 recorded in January.

NorthPoint President and CEO Liz Fetter says she was "stunned" by Verizon's move.

Fetter says NorthPoint is looking at its funding options and considering legal action.

Adam Guglielmo, an analyst with telecommunications consultancy TeleChoice, notes that capital markets are not in a very giving mood right now, and that NorthPoint already carries significant debt. "They are in trouble," he says.

But he adds that NorthPoint's problems shouldn't be too much of a concern for the company's customers.

"If NorthPoint goes, someone will continue to serve them," he says.

Verizon had hoped to use its merger with NorthPoint to help fulfill its out-of-region expansion plans. When GTE and Bell Atlantic merged to form Verizon, the companies agreed to expand beyond their core East Coast territories.

Verizon says it will fulfill its out-of-region obligations through its merger with OnePoint Communications, a competitive local exchange carrier and interexchange carrier serving the residential market, and its relationship with Metromedia Fiber Networks.

NorthPoint: www.northpointcom.com; Verizon: www.verizon.com