Verizon Communications said Monday that it has agreed to purchase prepaid wireless giant Tracfone for $6.25 billion in cash and stock. The deal is expected to close in the second half of 2021.
Tracfone, owned by Mexican wireless giant America Movil, is the largest reseller of wireless services in the U.S., with 90,000 retail locations and more than 21 million customers. Verizon already has a relationship with the company — about 13 million Tracfone customers currently rely on the Verizon wireless network via an existing wholesale agreement.
Verizon said in a press release that after the deal is completed, it plans to sell 5G service to Tracfone customers, as well as further develop the prepaid wireless giant’s distribution channels and expand its market opportunities.
“This transaction is aligned with what we do best: providing reliable wireless service alongside a best-in-class customer experience,” Verizon chairman and CEO Hans Vestberg said in a press release. “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.”
The deal includes about $3.125 billion in cash and $3.125 billion in Verizon stock. In addition, American Movil could get an extra $650 million in cash if Tracfone hits future certain performance targets. Verizon said it expects the deal to be accretive in its first full year after the close, adding that it will bring Tracfone’s 850 employees into the fold.
Verizon shares were up about 1% (80 cents each) to $60.49 per share in early trading Monday.
“We’re looking forward to welcoming all of Tracfone’s customers and each of Tracfone’s nearly 850 valuable employees,” Verizon Consumer Group EVP and Group CEO Ronan Dunne, said in a press release. “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.”
The deal comes about two months after Dish Network purchased prepaid wireless company Boost Mobile for $1.4 billion, as part of the regulatory concessions T-Mobile made to complete its $26 billion buy of Sprint. Boost has about 9 million prepaid wireless customers in the U.S., and Dish has planned to operate that business alongside its planned post-paid wireless offering.
Credit Suisse acted as financial advisor to Verizon and Debevoise & Plimpton acted as legal advisor.
This article originally ran on nexttv.com.
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