Genuity plummets after Verizon decides against reintegration

The value of Genuity’s stock plunged by 89% to 29 cents after Verizon Communications announced it would not reintegrate the network service provider. Genuity was valued at $2.29 at the start of today’s trading.

Vik Grover, analyst with Kaufman Bros., called Verizon’s decision “a death sentence” for Genuity.

“”Given the company’s substantial negative EBITDA of ($500 million), the weak outlook for enterprise data demand and overall sector distress, we think Verizon’s move throws Genuity into the abyss,” Grover said in a report issued this morning.

Verizon said the decision was made after a lengthy review and involved a number of factors. However, Vice Chairman Lawrence Babbio said during a press briefing at the Supercomm trade show held in June in Atlanta, the company was uncertain concerning its future relationship with Genuity. “Genuity has lost a fair amount of money,” Babbio said at the time.

Michael Bowen, principal with Soundview Technology Group said in a statement that the decision was a good business decision for Verizon. “This will enable Verizon to eliminate its liability to make loans to the beleaguered provider,” he said.

Verizon said it currently plans to continue using Genuity’s Internet-based backbone services and would work with Genuity to provide voice over Internet protocol services to businesses. In addition, Verizon said it would continue to use Genuity to supplement its network in states where the RBOC offers long-distance and Internet services.

Currently, Verizon offers long-distance service in eight of its 13 states – Maine, New Jersey, New York, Connecticut, Pennsylvania, Rhode Island, Vermont and Massachusetts – and expects to be approved for long-distance service in the remainder of its states by the end of the year. Verizon was forced to divest itself of Genuity as a condition of the merger between Bell Atlantic and GTE two years ago that created the carrier.

– Glenn Bischoff, senior writer