Published: Tue, September 15, 2020
Tech | By

Verizon to buy pre-paid mobile service Tracfone in $6.25 billion deal

Verizon said on Monday it will buy pre-paid mobile phones provider Tracfone, a unit of Mexican telecoms giant America Movil, in a $6.25 billion (roughly Rs. 45,932 crores) cash and stock deal. Among the Tracfone brands combined, there are about 21 million subscribers in the United States (most of which are in the low-income segment) and the parent brand already connects 13 million subscribers to Verizon towers.

The acquisition is anticipated to close in the second half of 2021, though it will still have to receive regulatory approval.

Verizon has already been dabbling in the value segment of the market a bit with Visible, but this acquisition shows more than a passing interest, and a convenient way to step up its involvement: Rather than build up a brand on its own (as it's already doing), it can simply swallow up an MVNO it's already working with - even if most of us probably forgot that Tracfone even existed, it has plenty of paying customers. Additionally, the agreement includes up to $650 million in future cash consideration based on certain predefined performance measures and other arrangements.

The US wireless industry is concentrated in the hands of three mobile carriers due to several merger deals in recent years: T-Mobile, which in April completed its $23 billion (roughly Rs. 1,69,032 crores) merger with Sprint to solidify its position in the United States, AT&T, and Verizon.

"We are excited about the opportunity to bring Tracfone and its brands into the Verizon family where we can put the full support of Verizon behind this business and provide exciting and compelling products into this attractive segment of the market", said Verizon CEO Hans Vestberg in a statement. It also will expand Tracfone's distribution and marketing opportunities.

Ronan Dunne, Executive Vice President and Group CEO, Verizon Consumer Group added: "Since its launch, Tracfone has developed strong consumer brands and has established itself as a clear leader in the value mobile segment".

Some more information about the leading MVNO in the U.S. Over 13 million Tracfone customers are already using Verizon. Wave7 cited factors for its success including third-party reps at Walmart, strong data plans, and the use of Verizon's high-quality network. Verizon expects the transaction to be accretive in the first full year following closing, excluding transaction and integration costs, and does not expect the transaction to materially impact capital expenditures.

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