Verizon inked a deal to acquire prepaid MVNO Tracfone from America Movil for $6.25 billion, making a play to strengthen its presence in the low-cost mobile segment.
The deal is expected to close in H2 2021, with Verizon paying half in cash and the remainder in stock. Up to $650 million more is on the table if certain performance targets are achieved. Nearly 850 Tracfone employees will be transferred.
Tracfone had 20.9 million subscribers at end-Q2 making it the largest MVNO in the US. More than half (13 million) already use Verizon’s network under an existing wholesale agreement.
Verizon ended Q2 with 119.8 million mobile customers, of which 3.9 million were prepaid.
Tracfone’s retail reach is another attraction for Verizon: the MVNO has partnerships with giants including Walmart, Target and Best Buy spanning 90,000 locations.
Ronan Dunne, Verizon consumer group CEO, stated the deal “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”.
Earlier this year, analysts tipped the Covid-19 (coronavirus) pandemic to boost the prepaid market [1], as cash-strapped consumers re-evaluate their mobile tariffs.
Upon completion, Verizon said it plans to offer 5G service, fixed wireless access residential broadband, and expanded international calling and roaming options to Tracfone customers; develop the MVNOs core brands including its largest, StraightTalk; and expand its distribution channels.
It added it will continue to serve Tracfone customers who receive service through the federal government’s Lifeline mobile subsidy programme [2].
[1] https://www.mobileworldlive.com/blog/blog-could-covid-19-boost-the-us-prepaid-market/
[2] https://www.mobileworldlive.com/latest-stories/us-operators-balk-at-new-lifeline-standards
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