Verizon Shelling Out Nearly $7 Billion for TracFone as Wireless Consolidation Continues

Verizon is spending more than $6 billion to buy TracFone, the mobile virtual network operator.

The carrier announced it will spend $3.13 billion in cash and the same amount in stock to buy TracFone, which currently belongs to América Móvil. The deal would give Verizon the biggest U.S. wireless services reseller. Moreover, it would help Verizon leapfrog to the top of the prepaid business market. TracFone serves about 21 million customers.

The transaction includes future cash considerations of up to $650 million. The companies say they anticipate the deal to close in the second half of 2021. However, it must still get regulatory approvals.

The companies already partnered with one another, with approximately 13 million TracFone subscribers using Verizon’s network. Verizon CEO Hans Vestberg said his team looks forward to putting “full support” behind TracFone and its brands.

Verizon’s Hans Vestberg

“This transaction is aligned with what we do best: providing reliable wireless service alongside a best-in-class customer experience,” said Vestberg. “ … We are pursuing this important strategic acquisition from a position of strength given our very strong and prudent financial profile.”

TracFone employs about 850 people, and Verizon executives said the company will welcome all of them.

“We are excited to expand our relationship with TracFone’s distribution partners, and when TracFone’s customers become part of our family, they will get the best of both worlds – more choices, better services and new features thanks to Verizon’s investment – but with the flexibility and control that they have come to value with its prepaid plans,” said Ronan Dunne, executive vice president and CEO for the Verizon Consumer Group.

Verizon’s Prepaid Business

Drew Fitzgerald of The Wall Street Journal writes that the largest U.S. carriers are buying more and more chunks of the prepaid market. AT&T owns Cricket Wireless, and T-Mobile owns Metro by T-Mobile. T-Mobile sold Boost Mobile as a regulatory condition for its Sprint acquisition.

“The move plunges Verizon deep into the prepaid market, a sector it has largely avoided by catering to more lucrative customers who pay for wireless service after it is rendered,” Fitzgerald said. “Customers on prepaid plans tend to switch providers more often, which operators consider a risk.”

This deal would ensure Verizon stays the country’s biggest cellphone carrier for a long time. https://t.co/vkeWInENsF

— Drew FitzGerald (@DrewFitzGerald) September 14, 2020

Mike Dano of Light Reading notes that TracFone has grown its U.S. prepaid business during the pandemic.

Ars Technica’s Jon Brodkin pointed out that TracFone faces a $6 million fine from the Federal Communications Commission for enrolling fictitious subscriber accounts into a government program.

Verizon earlier this year announced plans to acquire the video conferencing provider BlueJeans Network. Wireless carrier competition has heated up in 2020 with the race to make 5G available nationwide and T-Mobile’s merger with Sprint.