América Móvil sells US MVNO Tracfone to Verizon for $6.9bn

América Móvil sells US MVNO Tracfone to Verizon for $6.9bn

15 September 2020 | Alan Burkitt-Gray

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Mexico’s América Móvil is selling its US-based pay-a-you-go mobile phone service, Tracfone, to Verizon for as much as US$6.9 billion.

Tracfone has 21 million customers across a number of brands, and had revenues of $8.1 billion in 2019, says Verizon.

Ronan Dunne, the former O2 UK CEO who is now group CEO at Verizon’s consumer group, said: “Since its launch, Tracfone has developed strong consumer brands and has established itself as a clear leader in the value mobile segment. This transaction firmly establishes Verizon, through the Tracfone brands, as the provider of choice in the value segment, which complements our clear leadership in the premium segment.”

Brands in the Tracfone range include Total Wireless – which already uses the Verizon network under a mobile virtual network operator (MVNO) deal – and Walmart Family Mobile, sold through the store chain, as well as Telcel América, a service that, apparently unusually for the US, allows its users to call internationally.

Verizon will pay $3.125 billion in cash and $3.125 billion in its shares, plus “up to an additional $650 million in future cash consideration related to the achievement of certain performance measures and other commercial arrangements”, said Verizon.

Hans Vestberg (pictured), chairman and CEO of Verizon, said: “We are excited about the opportunity to bring Tracfone and its brands into the Verizon family where we can put the full support of Verizon behind this business and provide exciting and compelling products into this attractive segment of the market. We are pursuing this important strategic acquisition from a position of strength given our very strong and prudent financial profile.”

In its statement, Verizon said that “more than 13 million Tracfone subscribers currently rely on Verizon’s wireless network through an existing wholesale agreement”, a figure that implies eight million use other US networks. Verizon has not said whether they will be moved from AT&T, T-Mobile US or other network operators.

At least two of Tracfone’s brands, the Walmart-branded service and Simple Mobile, use T-Mobile US.

Verizon said: “Following the acquisition, [it] expects to bring its award-winning 4G LTE and 5G networks and other innovative technologies to Tracfone customers, further develop Tracfone’s distribution channels, and expand Tracfone’s market opportunities.”

“This transaction is aligned with what we do best: providing reliable wireless service alongside a best-in-class customer experience,” said Vestberg, a former CEO of Ericsson, until he was fired in 2016.