Verizon to Buy Prepaid Phone Provider TracFone for $6.25 Billion

TracFone is the largest reseller of wireless services in the U.S., with about 21 million subscribers.
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Verizon Communications  (VZ) - Get Report said Monday that it has agreed to buy prepaid mobile company Tracfone from America Movil  (AMOV) - Get Report in a $6.25 billion transaction.

Shares were of the New York-based telecom giant were up slightly to $60.12. America Movil was up 3.3% to $12.80.

Verizon said in a statement that it will pay $3.125 billion in cash and $3.125 billion in stock, with up to $650 million additional connected to performance goals. 

TracFone, a subsidiary of Carlos Slim Domit’s Mexico-based America Movil wireless, is the largest reseller of wireless services in the U.S., with about 21 million subscribers. 

Over 13 million TracFone subscribers use Verizon’s wireless network through an existing wholesale agreement. 

Verizon said it expects the acquisition to be accretive in the first full year following closing, and does not expect the transaction to materially impact capital expenditures.

Ronan Dunne, executive vice president and group CEO, Verizon Consumer Group, said in a statement that "we’re looking forward to welcoming all of TracFone’s customers and each of TracFone’s nearly 850 valuable employees." 

Verizon is the largest wireless carrier overall, with 116 million regular monthly subscribers, but has only 4 million prepaid customers, Bloomberg reported. 

T-Mobile  (TMUS) - Get Report has 20.6 million prepaid subscribers, with the largest group under the Metro brand, while AT&T  (T) - Get Report has 18 million prepaid subscribers, most under its Cricket brand. 

Earlier this year, the research firm Cowen said U.S. wireless carriers collectively lost a record 238,000 prepaid customers during the fourth quarter of 2019, and collectively lost 330,000 prepaid customers during the entirety of 2019, the first time the wireless industry lost prepaid customers during the course of a full year.