- Verizon has bought the prepaid provider Tracfone for $ 6.25 billion.
- The acquisition could give the company an edge over low-cost telephone services.
- If approved, the deal will close in the second half of 2021.
Because of the pandemic and the abundance of “good enough” services, people are switching to cheaper phone plans, and major airlines are taking advantage of this shift. Verizon (Disclaimer: This author also writes for Verizon Engadget) has announced that it will buy the prepaid provider Tracfone for the equivalent of 6.25 billion US dollars to improve its low-cost telephone service.
The buyout will help Verizon appeal to people who want “Value Wireless plans” and expand Tracfone’s reach, including support for 5G and fixed wireless Internet access. The network intends to continue to offer subsidized lifeline service to low-income Americans, and brands like Straight Talk will remain intact.
Continue reading: Why cell phone plans are so expensive
The expansion would add an additional 21 million subscribers to Verizon’s ranks, of whom 13 million are already using the Verizon network. It also gains access to a larger retail presence that spans 90,000 locations, including branches like CVS and Target.
If regulators approve the deal, Verizon should complete the acquisition by the second half of 2021.
This is not a completely unexpected step. In addition to the effects of COVID-19, the network is also facing stiff competition from AT & T’s Cricket and T-Mobile’s Metro. Verizon will take control of some of the cheapest services in the United States by purchasing Tracfone, not to mention brands more closely associated with prepaid than their own.
However, this might not make everyone happy. Competitive advocates and politicians have already been concerned about T-Mobile’s acquisition of Sprint. If Verizon successfully buys Tracfone it will further consolidate the market and reduce your choices.