Source – usatoday.com
Verizon to Acquire Frontier Communications in a $20 billion all-cash deal, as announced on Thursday. This acquisition is part of Verizon’s strategy to strengthen its subscriber base and enhance its competitive edge against key rivals AT&T and T-Mobile, who are increasingly focusing on expanding unlimited plans and bundling services.
Verizon’s offer of $38.50 per share represents a 37.3% premium over Frontier’s closing stock price from September 3, just before rumors of the acquisition surfaced. Frontier’s total debt of $11.25 billion as of June 30 will also be refinanced by Verizon as part of the agreement. Despite the announcement, Frontier’s stock traded at $35.10, below the offer price, after a surge of nearly 38% following the news.
Strategic Fit
Frontier Communications, which has 2.2 million fiber subscribers across 25 states, will be integrated with Verizon’s existing 7.4 million fiber subscribers in nine states and Washington, D.C. The acquisition will increase Verizon’s fiber passings to 25 million, bringing the company closer to AT&T’s 28 million fiber passings.
Verizon CEO Hans Vestberg emphasized that acquiring Frontier would allow Verizon to be more competitive in new markets, particularly in regions where Frontier has a significant presence, including the Midwest, Texas, and California. This acquisition is expected to provide Verizon with expanded reach beyond its core areas in the Northeast and mid-Atlantic.
Verizon to acquire Frontier in $20 billion deal | REUTERS
Industry Impact
While the acquisition positions Verizon to compete more effectively, analysts are tempering expectations. Craig Moffett, an analyst at MoffettNathanson, described the deal as providing only a modest boost to Verizon’s market presence. Despite the combined fiber passings, Verizon’s network will still cover only about 10% of the U.S., gaining roughly another 3% from Frontier, compared to AT&T’s 15% coverage. Moffett noted, “There’s simply no conceivable path where they can reach meaningful scale with fiber.”
Background and Timeline
The deal marks a notable reunion for Verizon and Frontier, as Verizon had sold its TV and internet operations in California, Texas, and Florida to Frontier in 2016 for $10.54 billion. This prior transaction included part of Verizon’s fiber networks, which will now return to the company with the current acquisition.
The acquisition is expected to close in approximately 18 months, subject to regulatory approval. If completed, it will strategically expand Verizon’s fiber network into new regions while strengthening its competitive positioning in the broadband market.
