Verizon starts to sweat TracFone acquisition

Verizon has formally asked the FCC to hurry up, please and thank you.

"We respectfully request that the commission move expeditiously to approve the transaction so that value-conscious prepaid customers can enjoy the benefits that the combined Verizon and TracFone will deliver as soon as possible," Verizon wrote in a filing to the FCC, noting that it has submitted more than 20,000 pages of documents in support of its proposed $7 billion purchase of América Móvil's TracFone during the past eight months.

The issue is noteworthy considering the FCC remains deadlocked between two Democrats and two Republicans, a situation that shows no signs of abating as President Biden looks for Congressional approval of his massive infrastructure spending proposal.

According to Verizon, which has the most subscribers of any wireless carrier in the US, the addition of TracFone's 21 million customers to its base "will provide significant benefits to consumers that a standalone TracFone cannot."

Specifically, Verizon said that its acquisition of TracFone would:

  • Allow TracFone to better compete with similar prepaid offerings like AT&T's Cricket Wireless, Dish Network's Boost Mobile and T-Mobile's Metro by T-Mobile.
  • Enable TracFone to sell cheaper phones, thanks to Verizon's buying power.
  • Improve the US government's Lifeline program, which provides telecom service to low-income Amreicans.
  • Expand TracFone's distribution options.
  • Improve TracFone's services. According to Verizon, "making TracFone a part of Verizon will allow Verizon to bring its full 5G experience and other technical advances to TracFone customers more quickly. Verizon also plans to make available its fixed wireless broadband home internet solutions to TracFone customers."
  • Ensure that TracFone's people remain employed. "There are no plans for any workforce reductions related to the transaction," Verizon noted.

Verizon's arguments are geared toward overcoming opposition to the transaction from the Communication Workers of America union, public interest group Common Cause and others. They argue that consolidation in the telecom market will ultimately lead to increased prices for consumers – an argument that's likely landing in a Biden administration keen to avoid the pro-business stance of the Trump era. Indeed, the merger of Sprint and T-Mobile was approved during Trump's tenure.

The financial analysts at New Street Research wrote earlier this year that the Verizon/TracFone process "bears watching," but believe the transaction will likely go through.

"We continue to believe the FCC leadership will impose some conditions that commit Verizon to continuing the service and avoiding disruptions but we are skeptical that it will compel divestitures."

América Móvil's top executive recently speculated that Verizon's purchase of TracFone would close in the third quarter of this year. That's roughly in line with the timeline Verizon laid out late last year when it announced the purchase; Verizon at the time said it hoped to close the deal in the second half of 2021.

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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