Verizon has requested that the Federal Communications Commission “move expeditiously” to approve its acquisition of TracFone, arguing that the deal will benefit both TracFone and its customers.
In a filing with the FCC, Verizon noted that it has been six months since the deal was put in motion and laid out a number of arguments in favor of the deal, among them:
-The deal will “bring owner’s economics” to TracFone, Verizon says, and enable “more competitive offers for consumers than anything a standalone TracFone could hope to achieve.” Verizon itself, the company acknowledges, “has by far the smallest share of prepaid subscribers among the nationwide wireless service providers and does not own a brand that has managed to attract material numbers of value-conscious customers.” Verizon points out that T-Mobile US and AT&T each offer prepaid through “flanker brands” Metro by T-Mobile and Cricket that have gained strength, while it says that TracFone “has lost nearly 20 percent of its customer base over roughly the same period.” Verizon claims that is because TracFone “does not have the network assets it needs to be a strong competitor.” It adds, “Metro and Cricket already leverage owner’s economics and benefit from lower network costs, and Boost, while still an MVNO, benefits from the below-market wholesale rates established in the T-Mobile/Sprint transaction.” Verizon illustrated this with a plan comparison that shows offerings from Metro and Cricket that cost $25-$30 per line per month, while plans from TracFone’s Straight Talk and Boost Mobile come in at $55 to $50 per line, respectively. If Tracfone gets owners’ economics, Verizon argues, “Over time, some TracFone customers likely will spend less for the same amount of service, while other consumers may choose to spend more to get more.”
-Allow TracFone to leverage economies of scale in device buying, where Verizon argues that it is a disadvantage compared to competitors who are better able to offer steep device discounts.
-“Allow TracFone to compete with nimbleness it cannot achieve on its own,” because the company must operate within the bounds of its multiple MVNO agreements and conduct negotiations if it wants to change the terms.
-Expand the company’s existing distribution channels and add TracFone employees and their knowledge of prepaid customers to Verizon. Verizon said that it “plans to revamp and expand TracFone’s existing distribution approach, broadening its physical footprint to thousands of additional distribution outlets, including in urban and diverse communities and rural areas.”
Verizon assured the FCC that it is “firmly committed to TracFone’s Lifeline business” and says it will have incentive to compete with T-Mobile US on that front. It also says in the letter to the FCC that “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.”
Verizon announced last September that it had agreed to spend up to $6.9 billion to buy the prepaid mobile virtual network operator from America Movil; in addition to $3.125 billion in cash and $3.125 billion in Verizon common stock, the acquisition agreement included up to $650 million more in future cash payments based on performance metrics. Verizon said at the time of the merger announcement that it expected the transaction to close in the second half of 2021.
Tracfone is the largest wireless reseller in the U.S. and serves about 21 million subscribers, with more than 13 million of them using Verizon’s network through an existing wholesale agreement. Its products are available in more than 90,000 retail locations across the U.S., and the company operates a number of subsidiary brands including StraightTalk, Total Wireless, Walmart Family Mobile, NET10 Wireless, SIMPLE Mobile and others.
