Verizon buys Tracfone for $6.2 bn to focus on low-income customers

Verizon has agreed to acquire Tracfone, a pre-paid mobile provider targeting low-income cusotmers in the U.S., for $6.25 billion from America Movil.
The consideration for the transaction will include $3.125 billion in cash and $3.125 billion in Verizon common stock, Verizon said.

Verizon had lost 68,000 mobile phone customers, who pay a monthly bill, in the first quarter amid lockdowns due to coronavirus outbreak that closed 70 percent of its retail stores. T-Mobile’s aggressive wireless plans have impacted both Verizon and AT&T.

Verizon, the # wireless operator in the United States, earlier said it expects to spend $17.5 billion to $18.5 billion in 2020, up from its prior forecast of $17 billion to $18 billion, mainly focusing on 5G network expansion.

T-Mobile recently became America’s #2 wireless provider beating AT&T. The deal will help Verizon to strengthen its market presence.

Verizon aims to enhance its presence in the value segment. Tracfone is long-time partner of Verizon. Tracfone has nearly 850 employees.

Tracfone is the largest reseller of wireless services in the US, serving 21 million subscribers through a network of over 90,000 retail locations nationwide. More than 13 million Tracfone subscribers currently rely on Verizon’s wireless network through an existing wholesale agreement.

The acquisition of Tracfone aligns with Verizon’s growth oriented Network as a Service strategy.

Verizon aims to offer value wireless plans with improved experiences and enhanced services, including fixed wireless residential broadband solutions, 5G access and expanded international calling and roaming options.

Verizon will continue to offer Lifeline service through Tracfone and further develop its core brands, products and distribution channels, including StraightTalk, the vast majority of whose customers operate on the Verizon network today.

Hans Vestberg, chairman and CEO of Verizon, said: “We are pursuing this acquisition from a position of strength given our very strong and prudent financial profile.”

Ronan Dunne, group CEO, Verizon Consumer Group, said: “Since its launch, Tracfone has developed strong consumer brands and has established itself as a clear leader in the value mobile segment.”

Verizon expects the transaction to close in the second half of 2021.