Here’s What Verizon Stands To Gain From Its Acquisition Of TracFone

Remember TracFone? The company, founded in 1996 as Topp Telecom, specializes in selling budget-friendly, pre-paid cellphones which were prominent in the pre-smartphone age. Even now, TracFone, a subsidiary of Mexico’s América Móvil SAB, still operates in the U.S. under StraightTalk and Net10 and has around 21 million users.

Now, Verizon has reached a deal to acquire TracFone for $6.25 billion, the Wall Street Journal reports, bringing millions more into the telecom giant’s massive user base. Since TracFone products merely access larger cell networks, roughly 13 million of its current users are already on Verizon’s network.

Verizon currently operates the largest cell network in the U.S. with 120 million users, dwarfing the competition from other giants in the market like AT&T and T-Mobile, the latter of which ballooned in size after recently acquiring Sprint.

The acquisition deal includes $3.125 billion cash and $3.125 billion in Verizon stock for TracFone, Verizon announced. The company will also be eligible for a further $650 million in cash should it meet certain financial performance goals. The deal is set to undergo an antitrust regulatory inspection, but Verizon expects the deal to close by the end of Q2 2021.

Notably prominent at Walmart locations, TracFone products can often go for as low as $15, giving Verizon a bigger presence in the cheapest segment of the wireless market. TracFone also offers the service Lifeline, which gives qualifying customers access to free phones and free monthly minutes. Verizon has pledged to keep this service active, the Verge reports.