Verizon Set to Acquire Frontier Communications in a $20 Billion Deal
Verizon Communications has revealed its plans to acquire Frontier Communications Parent Inc., a leading fiber internet provider in the US, in a $20 billion deal. This news follows a report by The Wall Street Journal that hinted at the possibility of such a deal, leading to a 38% increase in Frontier's shares in New York.
Details of the Acquisition
Verizon has agreed to pay Frontier investors $38.50 per share in cash, which is a 43.7% premium to Frontier's 90-day volume-weighted average share price on Tuesday. This was the last trading day before the media got wind of a potential acquisition.
The deal has received unanimous approval from the boards of directors of both Verizon and Frontier. However, it still requires the approval of Frontier shareholders and regulatory bodies. If all goes well, the transaction is expected to be finalized in approximately 18 months.
Impact of the Acquisition
In a press release, Verizon stated that the acquisition would significantly expand its fiber footprint across the nation, thereby accelerating the delivery of premium mobility and broadband services to both existing and new customers. It would also enhance Verizon's intelligent edge network for digital innovations such as AI and IoT.
With this deal, Frontier's 2.2 million fiber subscribers across 25 states will join Verizon's 7.4 million Fios connections in 9 states and Washington, DC. Frontier, which already has 7.2 million fiber locations, plans to expand its fiber footprint by an additional 2.8 million locations by the end of 2026.
Market Reaction
The Wall Street Journal was the first to break the news about the potential deal between Verizon and Frontier. Following this, Frontier's shares soared by as much as 38% to the mid-point of the $38 handle. However, the shares have since fallen by 9% to the low $35 handle.
The Wall Street Journal pointed out that Verizon, faced with slowing wireless revenue growth and an expensive dividend, has been investing in expanding its home-internet footprint. However, constructing new fiber-optic networks is costly and time-consuming, making existing broadband providers like Frontier attractive takeover targets.
From Bankruptcy to Acquisition
This deal marks a significant turnaround for Frontier, which filed for Chapter 11 bankruptcy in April 2020. It also underscores the importance of fiber network infrastructure in powering the artificial intelligence boom and the proliferation of data centers.
Bottom Line
The acquisition of Frontier Communications by Verizon is a significant move in the telecommunications industry. It not only marks a substantial turnaround for Frontier but also highlights the increasing importance of fiber network infrastructure in the digital age. What are your thoughts on this development? Feel free to share this article with your friends and let us know your views. Remember, you can sign up for the Daily Briefing, which is delivered every day at 6pm.
