Verizon Communications Inc. (VZ) has made a significant move in the telecommunications industry by acquiring Frontier Communications Parent, Inc. (FYBR) in an all-cash deal valued at $20 billion. This strategic acquisition will integrate Frontier’s advanced fiber network with Verizon’s extensive fiber and wireless assets, including its Fios service.
Under the terms of the agreement, Verizon will pay $38.50 per share in cash for Frontier, representing a 43.7% premium over Frontier’s 90-day volume-weighted average share price (VWAP) as of September 3, 2024. The deal is expected to close in about 18 months, subject to approval from Frontier shareholders, regulatory clearance, and other customary closing conditions.
Frontier’s 2.2 million fiber subscribers and 7.2 million fiber locations will join Verizon’s existing 7.4 million Fios connections, creating a substantial expansion of Verizon’s fiber footprint nationwide. This move will enhance Verizon’s ability to deliver premium mobility and broadband services, and expand its intelligent edge network for digital innovations like AI and IoT.
Frontier has been actively investing in its fiber network, allocating $4.1 billion over the past four years and planning to expand by an additional 2.8 million fiber locations by 2026. This investment will play a crucial role in bolstering Verizon’s network infrastructure and capabilities.
The acquisition is anticipated to drive growth in Verizon’s revenue and Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Verizon expects to achieve at least $500 million in annual cost synergies through increased scale, distribution, and network integration by the third year after the deal closes.
In response to the acquisition, FYBR shares are down 9.72% at $34.92 in premarket trading, while VZ shares are up 1.21% to $41.98. Investors can gain exposure to the stock through ETFs like Invesco S&P 500 Equal Weight Communication Services ETF (RSPC) and SPDR S&P Telecom ETF (XTL).
This acquisition marks a significant step for Verizon in its strategy to expand its fiber network and enhance its broadband offerings, further solidifying its position in the telecommunications landscape.