The US mobile carrier market continues to consolidate. The latest acquisition comes as Verizon begins to buy Tracfone, a popular prepaid carrier, with phones and and prepaid service cards a common sight on Walmart electronics shelves. The deal includes $3.125 billion in cash and an equal amount in stock, plus $650 in extra cash for hitting performance targets.
Tracfone currently has 21 million prepaid customers according to the press release, which is a considerable chunk, even next to Verizon’s 90+ million. Tracfone sells SIM cards, prepaid budget smartphones and basic phones, and refill service cards. Verizon and its Big Three competition are trying to expand into cheaper offerings, as the one-two punch of COVID pandemic unemployment and economic slump drive more and more mobile customers onto cheaper plans and devices.
Verizon already offers prepaid service, but nothing so cheap as Tracfone’s bottom rung, which offers 500 minutes, 500 text messages, and just 500 megabytes of data for $15 a month. Verizon’s cheapest plan is $40 a month for 5GB (though discounts are available), and Tracfone’s carrier-agnostic MVNO options allow customers to use different networks with different SIM cards.
Verizon expects the acquisition to pass US regulatory approval within a year or so, which seems doable. If you’re a current Tracfone customer, don’t expect much to change quickly, or even once the deal closes—there’s no reason for Verizon to mess with a winning formula.