Today Verizon Communications and Frontier Communications announced they have entered into a definitive agreement for Verizon to acquire Frontier in an all-cash transaction valued at $20 billion.
This strategic acquisition of a pure-play fiber internet provider in the U.S. will significantly expand Verizon’s fiber footprint nationwide, accelerating the company’s delivery of premium mobility and broadband services to current and new customers. It will also expand Verizon’s intelligent edge network for digital innovations like AI and IoT.
This combination will integrate Frontier’s cutting-edge fiber network into Verizon’s leading portfolio of fiber and wireless assets, including a sophisticated Fios offering. And over about four years, Frontier has invested $4.1 billion in upgrading and expanding its fiber network and now derives more than 50% of its revenue from fiber products. Frontier’s 2.2 million fiber subscribers across 25 states will join Verizon’s approximately 7.4 million Fios connections1 in 9 states and Washington, D.C. In addition to Frontier’s 7.2 million fiber locations, the company is committed to its plan to build an additional 2.8 million fiber locations by the end of 2026.
What are the strategic benefits? This deal will extend Verizon premium offerings and experience to Frontier’s consumer and small business customers. And Frontier customers and those previously outside of Verizon’s fiber footprint are expected to gain more choice and access to Verizon’s premium mobility, home internet, streaming and connected home offerings, alongside premium business products like Verizon Business Complete.
This deal is expected to create a market-leading broadband network with superior scale and distribution. And Frontier’s consumer fiber network – one of the largest and fastest-growing nationally – can be immediately and seamlessly integrated upon closing directly into Verizon’s Fios network, meeting existing Fios standards. Verizon and Frontier currently have about 10 million fiber customers across 31 states and Washington D.C., with fiber networks passing over 25 million premises, and both companies expect to increase their fiber penetration between now and closing. A trend shows that combined Mobile and Home Internet customers show increased loyalty and have an improved rate of churn by approximately 50% for postpaid mobility, which is expected to improve Verizon’s mobility economics.
Verizon will also gain access to Frontier’s high-quality customer base in markets highly complementary to Verizon’s core Northeast and Mid-Atlantic markets. And Frontier’s footprint offers substantial room for increased penetration in both fiber and mobility services, and Verizon is well-positioned with stores throughout Frontier’s territory.
Plus, the acquisition of Frontier is consistent with Verizon’s core strategy of growing and strengthening customer relationships. This deal is expected to expand Verizon’s share of the nationwide broadband market, building upon Verizon’s two decades of leadership at the forefront of fiber.
The deal is expected to be accretive to Verizon’s revenue and Adjusted EBITDA growth rates upon the closing of the deal. And Verizon expects to realize at least $500 million in run-rate cost synergies by year three from benefits of increased scale and distribution and network integration.
Following the closing of the deal, Verizon will continue to have a strong balance sheet and liquidity profile. And the company will maintain its capital allocation priorities, characterized by prudent investment in the business, a commitment to maintaining an industry-leading dividend and continued debt reduction.
As part of the agreement, Verizon will acquire Frontier for $38.50 per share in cash, representing a premium of 43.7% to Frontier’s 90-Day volume-weighted average share price (VWAP) on September 3, 2024, the last trading day prior to media reports regarding a potential acquisition of Frontier. The deal is valued at about $20 billion of enterprise value.
The Verizon and Frontier Boards have unanimously approved this deal of Directors. The transaction is expected to close in about 18 months, subject to approval by Frontier shareholders, receipt of certain regulatory approvals and other customary closing conditions.
Centerview Partners and Morgan Stanley acted as financial advisors to Verizon and Debevoise & Plimpton LLP acted as legal counsel. And PJT Partners served as financial advisor to the Strategic Review Committee of the Board of Directors of Frontier, and Barclays served as financial advisor to Frontier. Cravath, Swaine & Moore served as legal advisor to Frontier, and Paul, Weiss, Rifkind, Wharton & Garrison served as legal advisor to the Strategic Review Committee of the Board of Directors of Frontier.
KEY QUOTES:
“Connectivity is essential in nearly every part of our lives and work, and no one delivers better than Verizon. Verizon offers more choice, flexibility and value, and we continuously look for ways to provide the best product and network experience to our customers as we bolster our position as the provider of choice.”
“The acquisition of Frontier is a strategic fit. It will build on Verizon’s two decades of leadership at the forefront of fiber and is an opportunity to become more competitive in more markets throughout the United States, enhancing our ability to deliver premium offerings to millions more customers across a combined fiber network.”
– Verizon Chairman and CEO Hans Vestberg
“Less than four years ago, we set out an ambitious plan to Build Gigabit America, the digital infrastructure this country needs to thrive for generations to come. Today’s announcement is recognition of our progress building a best-in-class fiber network and delivering reliable, high-speed broadband to millions of customers across the country. It’s also a vote of confidence for the future of fiber. I am confident that this delivers a significant and certain cash premium to Frontier’s shareholders, while creating exciting new opportunities for our employees and expanding access to reliable connectivity for more Americans.”
– Nick Jeffery, President and CEO of Frontier
