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Fairpoint Communications Inc.'s (FRP) current struggles may portend tough times ahead for Frontier Communications Corp. (FTR) in the aftermath of its deal with Verizon Communications Inc. (VZ).

Their scenarios are similar. Both merged with Verizon's rural territory, paid Verizon in stock and agreed to pay a follow-up amount in cash through a debt offering. However, while Frontier expressed optimism about the deal Wednesday, Fairpoint said last week that it needs help with its capital structure.

"A debt structure such as it appears Frontier will take on makes it far more difficult to have resources" for investment in broadband, said Candice Johnson, a spokeswoman for the Communications Workers of America. "Consumers in northern New England are in that situation now with Fairpoint on shaky ground and not able to make the kinds of investment that communities and customers want and need."

There are lessons to be drawn from Fairpoint's struggles. Frontier needs to take better care of its balance sheet. It also needs to be aggressive in investing in its infrastructure, or face the same kind of deteriorating business Verizon was eager to sell.

Fairpoint and Frontier agreed to a deal structure called a Reverse Morris Trust, which is beneficial because it's tax-free to Verizon. Under the current deal, Frontier will give Verizon shareholders $5.3 billion in stock, and pay $3.3 billion in cash raised through a later debt offering.

Verizon gets debt relief without paying taxes, while Frontier triples in size and has the opportunity to tap an underserved market.

Verizon Chief Executive Ivan Seidenberg called it a win-win situation. But is it?

Fairpoint agreed to a similar deal with Verizon to absorb its New England rural assets, which the two companies completed early last year. It had to relieve Verizon of $1.7 billion in debt.

The goal was also the same: Utilize Fairpoint's expertise on the local level to unlock value Verizon has missed because of its focus on faster-growing wireless and FiOS businesses.

While sound in theory, it hasn't worked out so well in practice. Fairpoint has succeeded in reducing the number of access line losses, but its credit picture is a mess. Last week, the company warned in its first-quarter results that it was considering hiring a financial adviser to evaluate its capital structure and explore potential restructuring.

Following its report were a slew of credit downgrades by the major investment rating firms.

Fairpoint declined to comment.

There are indications that Frontier could avoid Fairpoint's fate. Frontier Chief Executive Maggie Wilderotter sounded confident about a smooth integration, and noted that it already serves in 11 of the 14 Verizon states. Fairpoint, however, operated in the three states it acquired from Verizon.

Frontier also seems to have a closer eye on its balance sheet. Chief Financial Officer Donald Shassian said the company was changing its credit philosophy and would seek an investment grade rating. He noted that the deal with Verizon puts it in a better investment position because the overall company will have a lower debt ratio than before.

Unlike with Fairpoint, the ratings agencies seem to approve Frontier's move. Moody's put Frontier on review for a possible upgrade, while Fitch Ratings put the company's debt on Ratings Watch Positive.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com