By Drew FitzGerald
Verizon Communications Inc. said it has agreed to buy prepaid wireless reseller TracFone for up to $7 billion in cash and stock, bringing the country's largest reseller of cellphone services under the wing of the country's biggest wireless provider.
TracFone, a unit of Mexico's América Móvil SAB, operates in the U.S. under its namesake brand as well as StraightTalk and Net10. The company doesn't run its own physical network in the U.S. and instead rides on other cellphone carriers' systems for a fee.
About 13 million of TracFone's 21 millions subscribers already use Verizon's network through an existing agreement.
Verizon said the deal will include about $3.125 billion of cash and $3.125 billion in Verizon shares. TracFone could get an additional $650 million cash payment tied to some performance measures and other commercial arrangements.
Verizon is the biggest U.S. provider with about 120 million connections, but it has been competing in a mature market that is now dominated by three providers. T-Mobile US Inc. became the No. 2 provider by subscribers after swallowing Sprint earlier this year.
TracFone, backed by Mexican billionaire Carlos Slim Helu, grew into the biggest U.S. cellphone reseller by catering to frugal customers through Walmart Inc. stores and other independent dealers. It offers service for as little as $15 a month with limits on internet data as well as the number of texts and phone calls.
The coronavirus pandemic helped boost TracFone's subscriber numbers earlier this summer, though the company's growth has flagged in recent years under pressure from AT&T Inc. and T-Mobile prepaid plans.
The deal is subject to approval from antitrust and telecom regulators. Federal competition enforcers have traditionally viewed virtual-network operators like TracFone as resellers of wholesale network capacity owned by companies like Verizon that own the cell tower equipment and lines that carry their traffic, so the deal is unlikely to attract as much scrutiny as T-Mobile's Sprint takeover did when it was announced in 2018. Verizon said it expects its transaction to close in the second half of 2021.
Traditional wireless providers also face competition from cable providers like Charter Communications Inc. and Comcast Corp., which now resell cellular service to their customers using networks operated by Verizon and others.
Write to Drew FitzGerald at email@example.com