Verizon Communications, the US telecommunications giant, recently announced the acquisition of rival FrontierCommunications, the largest fiber Internet service provider in the United States, in an all-cash transaction worth 20 billion dollars. This agreement, which should be completed within approximately 18 months, represents a crucial strategic step for Verizon, significantly expanding its footprint in the optical fiber in the United States.
The details of the acquisition
The deal calls for Verizon to buy Frontier at price of $38,50 per share, a premium of 44% to the volume-weighted average price of Frontier's shares over the last 90 days. The transaction is expected to be accretive to both the company's revenue and adjusted EBITDA upon closing. As reported by wsj, this transaction will allow Verizon to integrate the 2,2 million subscribers to Frontier's fiber, distributed in 25 states, with the 7,4 million Fiber Optic Service (Fios) connections it already owns in nine states and Washington DC
Network Expansion and Integration
The acquisition will have a major impact on Verizon's fiber network expansionFrontier has invested $4,1 billion over the past four years to upgrade and expand its fiber network, deriving more than 50% of its revenue from fiber products.
The integration of Frontier's fiber network with Verizon's will serve approximately 10 million fiber customers in 31 states and Washington, D.C., with networks spanning more than 25 million locations. Both companies plan to further expand their fiber coverage through the close of the acquisition.
Financial and strategic benefits
From a financial standpoint, Verizon plans to achieve cost synergies for at least $500 million within the third year of integration. This is due to the benefits of increased scale and network distribution. The acquisition was unanimously approved by the Boards of Directors of Verizon and Frontier and will now have to obtain shareholder approval of Frontier and the necessary regulatory approvals.
"Connectivity is essential to nearly every aspect of our lives and work, and no one delivers it better than Verizon. The acquisition of Frontier is a strategic move that strengthens our position as a leader in fiber and makes us more competitive in more markets across the United States," said Hans Vestberg, president and CEO of Verizon.
“Today's announcement recognizes our progress in building a world-class fiber network and delivering reliable, high-speed broadband to millions of customers across the country,” said Nick Jeffery, president and CEO of Frontier.
