Verizon (VZ) Buying Tracfone In A Deal Valued At Over $6 Billion

By Amit Chowdhry ● September 14, 2020
  • Verizon (NYSE: VZ) announced it entered into an agreement with America Movil to buy Tracfone in a deal valued at over $6 billion. These are the details.

Today Verizon (NYSE: VZ) announced it entered into an agreement with America Movil to buy Tracfone, which is the leading pre-paid and value mobile provider in the U.S. in a deal valued at over $6 billion. The deal expands Verizon’s portfolio into the value segment, bringing enhanced access to its wireless network and suite of mobility products and services to a new customer base. Tracfone is known as the largest reseller of wireless services in the US, serving about 21 million subscribers through a network of over 90,000 retail locations nationwide.

Over 13 million Tracfone subscribers currently rely on Verizon’s wireless network through an existing wholesale agreement. And following the acquisition, Verizon expects to bring its 4G LTE and 5G networks and other innovative technologies to Tracfone customers, further developing Tracfone’s distribution channels, and expanding Tracfone’s market opportunities.

The acquisition of Tracfone aligns with Verizon’s Network as a Service strategy and will provide more U.S. consumers seeking value wireless plans with improved experiences and enhanced services, including fixed wireless residential broadband solutions, 5G access and expanded international calling and roaming options. And the portfolio of Tracfone brands creates a platform for growth and innovation in Verizon’s support of the value and low income segments. Verizon plans to continue to offer Lifeline service through Tracfone and further develop its core brands, products and distribution channels, including StraightTalk, the vast majority of whose customers operate on the Verizon network today.

The consideration for the deal will include $3.125 billion in cash and $3.125 billion in Verizon common stock, subject to customary adjustments at closing. And the agreement also includes up to an additional $650 million in future cash consideration related to the achievement of certain performance measures and other commercial arrangements.

Verizon expects to drive significant benefits and network synergies from the transaction. And 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.

The deal is subject to receipt of regulatory approvals and other customary closing conditions. Verizon is expecting the transaction to close in the second half of 2021.

Credit Suisse is acting as financial advisor to Verizon and Debevoise & Plimpton is acting as legal advisor.

KEY QUOTES:

“This transaction is aligned with what we do best: providing reliable wireless service alongside a best-in-class customer experience. 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. We are pursuing this important strategic acquisition from a position of strength given our very strong and prudent financial profile.”

— Hans Vestberg, Chairman and CEO of Verizon

“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.”

— Ronan Dunne, Executive Vice President and Group CEO, Verizon Consumer Group