Verizon has announced that it has bought the largest reseller of wireless services in the United States, Tracfone, for more than $ 6 billion in cash, stock and future consideration.
The deal includes $ 3.125 billion in cash, $ 3.125 billion in Verizon ordinary shares at closing. In addition, Verizon will pay up to an additional $ 650 million in future consideration depending on the performance of Tracfone and other trade agreements.
Tracfone has a large network of 21 million subscribers, but does not have its own cellular network. Instead, it pays established mobile phone companies, including Verizon, to use their networks. It then resells access to these networks to retail customers through more than 90,000 points of sale.
Tracfone is considered a budget-friendly cellular offering, aimed at low-income buyers who prefer to pay as they go rather than receiving a monthly bill. Plus, being a prepaid cellular offer, there’s no credit check, which makes it even more appealing to budget-conscious customers. The purchase of Tracfone gives Verizon an immediate foothold in this important segment.
Tracfone customers will have access to Verizon 4G LTE and 5G networks. Verizon also plans to expand Tracfone’s distribution channels and expand its market opportunities to include residential broadband and international calling.
To further assist low-income users, Verizon plans to allow Tracfone to continue offering its Lifeline service. This service provides low-income families in some states with free cell phones and free monthly minutes.
“This transaction is what we do best – providing reliable wireless service and a best-in-class customer experience,” said Hans Vestberg, president and CEO of Verizon.
“We are excited about the opportunity to integrate Tracfone and its brands into the Verizon family, where we can put the full support of Verizon behind this business and deliver exciting and compelling products in this attractive segment of the market. We are pursuing this important strategic acquisition from a position of strength given our very solid and prudent financial profile.
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