Verizon Buys TracFone For $7 Billion In Cash And Stocks
Verizon said it has agreed to buy TracFone, a unit of Mexico’s América Móvil SAB, that includes the brands StraightTalk and Net10 for about $3.125 billion of cash and $3.125 billion in Verizon shares. TracFone could get an additional $650 million cash payment tied to performance measures and other commercial arrangements. With the move Verizon is now the biggest player in the prepaid market.
Shares of America Movil gained about 5.1% in New York trading on the news. Shares of Verizon were up 1% to $60.37.
Verizon is the biggest U.S. provider with about 120 million connections, but competes in a market now dominated by T-Mobile US , AT&T and itself.
Verizon said adding TracFone would vault it to the top spot in the prepaid market of around 25 million. T-Mobile, owner of the Metro service, has more than 20 million prepaid customers. AT&T serves about 18 million U.S. prepaid customers mostly through its Cricket brand.
Verizon consumer chief Ronan Dunne said TracFone will remain a distinct business ...
“It’s a business we know well but it’s not one where we’ve been driving our own destiny,” Mr. Dunne said in an interview. “They’re a winner in this segment already. We see this as a growth platform.”
TracFone, backed by Mexican billionaire Carlos Slim Helu, grew into the biggest U.S. cellphone reseller by catering to frugal customers. (About 13 million of TracFone’s subscribers already use Verizon’s network) Like Consumer Cellular and Republic Wireless, Tracfone had a wholesale deals to rent space on existing cellular networks and then resell services under their own brands.
For the first time in a long time Verizon and AT&T have pursued different strategies. With TracFone, Verizon is investing in its core business of cellular connections.While AT&T moved into television and media by acquiring DirecTV in 2015 and Time Warner in 2018.
The deal is subject to approval from antitrust and telecom regulators. The deal is unlikely to attract as much scrutiny as T-Mobile’s Sprint takeover did when it was announced in 2018. Verizon said it expects its transaction to close in the second half of 2021.