Telecommunications giant Verizon Communications plans to acquire smaller player Frontier Communications in a $20 billion all-cash deal as it looks to expand its fiber network to take on its biggest rival, AT&T.
Verizon Announces Offer to Acquire Frontier Communications
According to Verizon, Frontier operates the “largest pure-play fiber internet” network in the U.S. with 2.2 million fiber subscribers in 25 states. Over the past four years, Frontier has invested $4.1 billion in upgrading and expanding its fiber network and now generates more than 50% of its revenue from fiber products. That will add to Verizon’s approximately 7.4 million Fios connections in nine states and Washington, D.C., the telco said.
Together, Verizon and Frontier operate fiber networks that cover more than 25 million locations in 31 states and Washington, D.C. Both companies expect to increase their fiber penetration between now and the closing of the deal.
It's a relatively small deal: Frontier would add about 4% to Verizon's revenue and adjusted earnings before interest, taxes, depreciation and amortization. "For Verizon, this would be a bold move toward convergence … which, in our view, is an absolutely horrible idea," Craig Moffett of MoffettNathanson Research wrote in a research note Thursday. Verizon's current fiber footprint covers a small portion of the U.S., and "Frontier would not materially change that," the analyst noted.
