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Business

Verizon to buy wireless services provider Tracfone in $6.25bn deal

  • The US wireless industry is concentrated in the hands of three mobile carriers due to several merger deals in recent years.
  • This transaction firmly establishes Verizon, through the Tracfone brands, as the provider of choice in the value segment.
14 Sep 2020

Verizon Communications Inc said on Monday it will buy pre-paid mobile phones provider Tracfone, a unit of Mexican telecom America Movil, in a $6.25 billion cash and stock deal.

Tracfone, which serves about 21 million subscribers through more than 90,000 retail locations across United States, said more than 13 million of its subscribers rely on Verizon's network under an existing agreement. Verizon is the largest US wireless carrier by subscribers.

The US wireless industry is concentrated in the hands of three mobile carriers due to several merger deals in recent years: T-Mobile, which in April completed its $23 billion merger with Sprint Corp to solidify its position in the United States; AT&T Inc; and Verizon.

America Movil, which was created from a state monopoly, is Mexico's largest telecoms operator by far and is controlled by the family of Mexican billionaire Carlos Slim, the Latin American nation's richest man.

Tracfone had become popular with the lower end of the ultra-competitive US telecoms consumer market and Verizon now plans to provide new products into that segment after this "strategic acquisition," said Hans Vestberg, chairman and chief executive of Verizon.

"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," added Ronan Dunne, executive vice president and group CEO, Verizon Consumer Group.

Shares of Verizon were up more than 1% in premarket trading.

The deal would include $3.125 billion in cash and $3.125 billion in Verizon stock.

Credit Suisse is acting as financial adviser to Verizon on the deal that is expected to close in the second half of 2021.