Verizon Communications has entered into a definitive agreement that will see it acquire Frontier Communications Parent, Inc. in an all-cash deal worth $20 billion to bolster its broadband and mobility services. This acquisition is expected to grow Verizon’s fiber network nationwide, enabling the company to increase its provision of top-notch mobility and broadband services to consumers.
Key Reason for the Acquisition Of Frontier by Verizon
Frontier Communications, a pure fiber broadband service provider in the U. S. has been strategic in fiber network modernization and extension for the last four years with an investment of $4. 1 billion. Frontier has been generating over 50% of its total revenues from the fiber product line and has 2. 2 million fiber subscribers throughout 25 states.
At this point, it is appropriate to talk about the synergistic effect of the two approaches to increase the coverage area.
Frontier’s fiber network will complement Verizon’s portfolio of assets of fiber and wireless, including its superior Fios product. Combined, both companies will serve over 10 million fiber consumers in 34 states and Washington D. C where fiber networks cover more than 25 million homes.
Strategic Benefits for Verizon
The acquisition of Frontier supports Verizon’s long-term plan to expand and enhance its customer base. It is expected to increase Verizon’s market share of the broadband market across the country, leveraging on its twenty-year experience at the vanguard of fiber. Further, the deal will assist Verizon to effectively respond to the rivals namely AT&T and T-Mobile which are also intensifying their efforts towards offering unlimited plans and various bundles.
According to Verizon Chief Executive Officer Hans Vestberg, “The acquisition of Frontier Communications is a perfect synergy. It will expand Verizon’s twenty-year leadership in fiber and is an opportunity to become more effective in more markets throughout the United States, making premium services available to millions of more customers through a single fiber network.
Financial Implications
According to the agreement, Verizon will purchase Frontier at $38. 5 per share in cash and this was a 37% premium to the company’s pre-offer stock price. 3% to the closing price of Frontier’s stock on the 3rd of September, 2024. The transaction is expected to add to Verizon’s revenue and adjusted EBITDA growth rates upon the completion of the transaction.
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