The US mobile operator market continues to consolidate. The latest acquisition comes as Verizon begins buying Tracfone, a popular prepaid carrier, with prepaid phones and service cards a common sight on Walmart tablet computers. The deal includes $ 3.125 billion in cash and an equal amount in shares, plus an additional $ 650 in cash to meet performance targets.
Tracfone currently has 21 million prepaid customers according to the press release, which is a considerable share, even alongside Verizon’s 90 million. Tracfone sells SIM cards, prepaid budget smartphones and basic phones, and recharge service cards. Verizon and its Big Three competitors are trying to expand into cheaper offerings, as unemployment from the COVID pandemic and the economic crisis push more and more mobile customers to cheaper plans and devices.
Verizon already offers prepaid service, but nothing quite as inexpensive as the lower end of Tracfone, which offers 500 minutes, 500 text messages, and just 500 megabytes of data for $ 15 per month. Verizon’s cheapest plan is $ 40 per month for 5GB (although discounts are available), and Tracfone’s carrier-independent MVNO options allow customers to use different networks with different SIM cards.
Verizon expects the acquisition to pass U.S. regulatory approval within about a year, which appears feasible. If you are a current Tracfone customer, don’t expect much to change quickly, or even after the deal is done. Verizon has no reason to play with a winning formula.