Verizon buys America’s largest MVNO, Tracfone
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. This transaction firmly establishes Verizon, through the Tracfone brands, as the provider of choice in the value segment, which complements our clear leadership in the premium segment. We’re looking forward to welcoming all of Tracfone’s customers and each of Tracfone’s nearly 850 valuable employees. 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. Being connected is now more important than ever, and Tracfone customers will benefit from Verizon’s innovations–both now and in the future.”
Verizon says that it expects the deal to be accretive in the first full year following the deal’s closing. Big Red says that the acquisition of Tracfone will not require it to “materially impact capital expenditures.” The deal still requires some regulatory approval and undergo what Verizon calls “customary closing conditions.” The purchase is expected to close during the second half of 2021. And if you’re keeping track of the investment banking league tables for some strange reason, Credit Suisse acted as financial advisor to Verizon and Debevoise & Plimpton acted as its legal advisor. New Street telecom analyst Jonathan Chaplin says that if Verizon were to move Tracfone’s 8 million subscribers to its own networks, the carrier could save $800 million annually. Over 13 million Tracfone customers are already using Verizon.
By purchasing Tracfone, Verizon becomes more competitive in the pre-paid sector of the industry. At last count, Verizon has 4 million pre-paid customers compared to 18 million for AT&T and 21 million for T-Mobile. Verizon has preferred to focus on its post-paid business where it can achieve a higher profit margin with a much lower churn. The press release issued by Verizon to announce the transaction includes a new tag line that says, “Bringing together industry leading value and premium brands on America’s most reliable network.”