MONTPELIER, Vt. – Vermont regulators turned thumbs down Friday on FairPoint Communications’ proposed $2.7 billion buyout of Verizon Communications’ land lines in northern New England, citing concerns about the company’s financial viability but inviting it to reapply.

In a decision that pulls the plug – for now – on the three-state deal, the Vermont Public Service Board denied the petition by FairPoint Communications, of Charlotte, N.C.

“The board found that FairPoint had not demonstrated that it would be financially sound as it seeks to operate the newly-acquired territories in Vermont, Maine and New Hampshire – a service territory that has five times the number of access lines as FairPoint presently has,” the Board said in a prepared statement.

The company would have to borrow $2.5 billion to complete the transaction, and the debt service could exert “significant financial pressure” when combined with operating costs and revenue projections, the board said.

But the regulators also said that – except for the financial risks – it could approve the merger, subject to a series of conditions, and invited FairPoint to submit revisions that addressed those risks.

“This is a procedural move that we consider an invitation to discuss the conditions, to introduce more information into the record,” said Rose Cummings, a spokeswoman for FairPoint. “We are looking at it as an invitation to continue discussions around [the] conditions, just a procedural bump.”

FairPoint wants to take ownership of Verizon’s 1.6 million access lines, along with Internet service, in northern New England. Verizon would retain its wireless phone operations in the region.

“While we had hoped the Vermont Public Service Board had approved the transaction today, its order does recognize significant benefits for consumers and business in the state,” said Polly Brown, Verizon’s state president for Vermont. “Today’s order also invites the parties to submit a revised proposal to address the board’s remaining concerns. The parties will evaluate the order and respond accordingly.”

David O’Brien, the commissioner of the Vermont Public Service Department, which represents ratepayers before the board, said he believed FairPoint and Verizon could give the board a new proposal within a short period of time.

“We remain open to the potential for a modified proposal that would better meet the needs of Vermont consumers, as outlined in the board’s order,” O’Brien said at a Montpelier news conference. “We welcome the opportunity to work with a telecommunications provider that has interest and expertise in serving rural customers.”

Mike Spillane, business manager for the International Brotherhood of Electrical Workers Local 2326, which represents Verizon workers in Vermont and opposed the sale, said the union’s concern with the proposal was the same as that of the Public Service Board.

“They did not have enough money to run the state as it should be run,” Spillane said. “Where is it going to come from? The telecommunications world is wicked expensive.”

Regulators in each of the states have to approve the deal to allow it to go forward, and they have spent months poring over documents and hearing testimony about its would-be effect.

But Vermont’s action doesn’t necessarily kill the sale, according to Meredith Hatfield, New Hampshire’s consumer advocate.

“I think what they’re saying is ‘It’s rejected as proposed but here are the conditions,”‘ she said.

New Hampshire is open to considering a revised deal after its Public Utilities Commission staff recommended against the initial proposal, she said.

“Our commission held preliminary deliberations on Monday and none of the commissioners thought it was in the public interest as proposed,” Hatfield said.

“I think our commission is waiting to hear from the companies.”

But given that the companies have said they want to close the deal Jan. 31, a lot has to happen first, she said.

In Maine, the Public Utilities Commission was scheduled to take up the deal last week, but postponed its deliberations after FairPoint, Verizon, the public advocate, PUC staff and other interveners reached an agreement addressing various concerns with the transaction.

But unions representing Verizon employees didn’t sign off on it, and Maine regulators are scheduled to take it up again Wednesday.

Vermont state Sen. Vincent Illuzzi, who represents the rural northeastern part of the state and opposed the sale as proposed, said he was concerned about customer service if FairPoint took over.

“FairPoint’s shareholders are entitled to a return on investment. FairPoint’s debt holders are entitled to be repaid for the money they’ve advanced to make this deal a reality. As structured, one or both would not have been happy six to 18 months down the road, and I also think service would have suffered,” said Illuzzi, R-Essex-Orleans.

FairPoint shares fell 66 cents, or 4.2 percent, to $14.99.