Verizon Communications will acquire cable provider Frontier Communications in a cash transaction valued at $20 billion. The acquiring company will pay $38.50 per share.
If the definitive agreement announced today closes, Verizon will expand decisively beyond its strength in the northeast and mid-Atlantic states. Frontier is particularly strong in the upper midwest, Texas, and California.
Frontier, which is in investment mode, has a fiber footprint offering access to about 7.2 million fiber locations now and plans to add 2.8 million more by the end of 2026. It now has 2.2 million fiber subscribers in 25 states. Last month, Frontier said it would offer 7 Gbps connectivity across its entire footprint.
Verizon has about 7.4 million Fios connectionsin nine states and Washington, D.C.
Various approvals and votes typical of a deal of this size are expected to take 18 months. If the deal closes, the new entity will have 25 million fiber passings in 31 states and the District of Columbia.
In acquiring Frontier, Verizon will take control of a fiber network into which much investment has been made. During about the past four years, Frontier invested $4.1 billion into fiber network expansion and now, according to Verizon’s announcement, derives more than half of its revenue from fiber related products.
In a webcast announcing the deal, Verizon Chairman and CEO Hans Vestberg focused on the synergies of Verizon’s mobile and Frontier’s fiber assets. The goal, clearly, is to incorporate these various elements — wireless, fixed wireless access (FWA), fiber, and Verizon’s edge network — into a highly integrated network serving residential and small businesses with service and delivery options.
“Nothing has changed in our strategy that we laid out a couple of years ago: To build one network and try to get as many connections on top of it and [provide] different access technologies to different types of customers in different moments,” Vestberg said. “That has not changed. What’s a little bit changed is that we saw the ‘build versus buy.’ We could have continued to build with our fiber outside the ILEC, but the economics of this deal and the time-to-market were of course was very, very appealing to us.”
Verizon pointed to several rationales for acquiring Frontier. They include increasing choice and access to Frontier customers and others outside Verizon’s existing footprint; increased scale and distribution and the combining of Frontier’s broadband with Verizon’s mobile products. The press release says that the long-term strategies of the two companies are complementary. In addition, Verizon already has a presence in Frontier’s footprint through its mobile retail stores.
The marriage fiber and of FWA approaches is an important element of the Verizon/Frontier deal. “Fiber and fixed wireless access are winning in the market,” Vestberg said. “With Frontier’s fiber added to our portfolio, we will be the only carrier with size and scale in both wireless and fixed wireless.”
Verizon projects the generation of $500 million or more in annual run-rate cost synergies and reaffirms its 2024 guidance.
Vestberg noted that Fios is celebrating its twentieth anniversary and said that plans for its participating in the Broadband Equity, Access, and Deployment (BEAD) Program will not be impacted by the acquisition.
