Verizon Buys Tracfone As U.S. Wireless Gets Even More Consolidated

from the merge-ALL-the-things dept

As economists and experts had warned, the recent $26 billion Sprint T-Mobile merger effectively decimated the prepaid space. T-Mobile had already laid off around 6,000 employees at its Metro Prepaid division, with more layoffs expected. Many of the "mobile virtual network operators" that operated on Sprint's network now face an uncertain future, with growing resentment in the space among prepaid vendors, who say T-Mobile is already using its greater size and leverage to erode commissions and to renegotiate their contracts for the worse. Many prepaid vendors are calling for help that most certainly won't be coming any time soon from the Trump Federal Trade Commission (FTC) and Department of Justice’s Antitrust Division.

With that as backdrop, another major effort at wireless consolidation has emerged with Verizon's announced purchase of Tracfone, one of the biggest prepaid vendors in the U.S. The $6.2 billion deal will, Verizon insists, result in "exciting and compelling" products in the years to come:

Yes, if there's one word that American consumers have come to associate with major telecom mergers, it's "excitement."

The problem here, of course, is that the direct result of mindless M&A in the U.S. telecom space couldn't be any more apparent. Less overall competitors means less effort to seriously compete on price. And the MVNO space had already been under relentless assault by companies like Verizon that have slowly but surely done their best to elbow out any smaller players that dare seriously compete on price with the major networks they must rely on to survive.

With the postpaid market saturated, wireless players are now forced to eek out growth wherever possible. In this case, via acquisitions, followed by only a superficial continued dedication to prepaid wireless lower-priced offerings. As part of the Tracfone deal, Verizon not only nabs 21 million Tracfone customers, but the company's Net 10, Walmart FamilyMobile, SafeLink, Simple Mobile, Straight Talk Wireless, and Clearway prepaid brands as well.

Fewer major networks means less incentive than ever to negotiate on rates, roaming, or much of anything else. With Sprint (the most friendly company to MVNOs by a wide margin) now out of the picture, things have gotten more treacherous for smaller MVNOs than ever. Of course, if the U.S. stays close to its historical norm, in about five years U.S. wireless data (pre and postpaid alike) will be significantly higher, and everybody will be left standing around with a dumb look on their collective faces wondering what went wrong.

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Filed Under: competition, mergers, mvnos, prepaid wireless, wireless
Companies: tracfone, verizon


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  • identicon
    Anonymous Coward, 18 Sep 2020 @ 6:49am

    Tracfone? Who cares about Tracfone? How many blockbuster movies have they made? EVER?

    A REAL phone-company visionary would have bought ABC or Disney, thus releasing a tsunami of investment, innovation, and inhumation--transforming humanity, bringing peace to the Middle East, and creating effective troll filters.

    OK, I lied about the troll filters. That only comes after the tax rebate.

    reply to this | link to this | view in chronology ]

  • identicon
    kallethen, 18 Sep 2020 @ 7:20am

    I'll admit this has me worried, I've been a long time Tracfone user, because I don't have to pay a ridiculous amount for my service. If(when) Verizon f#$%@ with the pricing, I will explore other options even though I don't want to. I've been happy with Tracfone. :(

    reply to this | link to this | view in chronology ]

  • identicon
    Bruce C., 18 Sep 2020 @ 8:23am

    More than meets the eye

    Tracfone also owns Net10 as well as contractless service under its own brand name.
    Net10 has been around a while: it started as a long distance carrier to "call anywhere in the US for 10 cents a minute" using the old 5 digit alternative carrier codes.

    reply to this | link to this | view in chronology ]

    • identicon
      Bruce C., 18 Sep 2020 @ 8:26am

      Re: More than meets the eye

      Sorry, i saw later that the subsidiary companies were listed in TFA. Hope that at least the history of Net10 proved entertaining.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 18 Sep 2020 @ 8:35am

    Yes, if there's one word that American consumers have come to associate with major telecom mergers, it's "excitement."

    We have the best excitement, no one has more excitement than we do.

    reply to this | link to this | view in chronology ]

  • identicon
    Rekrul, 18 Sep 2020 @ 10:18am

    My friend is a long time T-Mobile customer. After the merger, the service quality went downhill. His phone now drops calls for no apparent reason. I'll be talking to him when the line just goes dead. Or one of us suddenly can't hear the other.

    He recently bought a Tracfone through a shopping channel offer. I'm sure he'll be thrilled to hear that it's now being bought by Verizon...

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 18 Sep 2020 @ 10:49am

    To grow OR to kill?

    Much discussion elsewhere whether this is buy your competitor to grow or to kill them. Most seem to believe it's kill based on past history.

    What surprised me is the time frame. After Jan. 2021 they probably face a lot more regulatory problems than before. After all, they currently have "buddies" inside right now. (You know who I mean.)

    reply to this | link to this | view in chronology ]

  • identicon
    Smartassicus the Roman, 18 Sep 2020 @ 10:58am

    Well Shit

    I'm a longtime Tracfone user and have been very happy with paying less than $100 a year for all the service I need. But VZW's signal here is crap and I use an AT&T Tracfone sim card in my paid-for phone. I wonder if Verizon will be paying ATT for sevice, or if I'm about to get dumped and have no alternative, just like I'm forced to use Comcrap because there's nothing else.

    reply to this | link to this | view in chronology ]

  • icon
    Stan (profile), 18 Sep 2020 @ 11:03am

    Verizon-speak

    It's always the same rhetoric: "We are excited about the opportunity to [snip]... where we can put the full support of [more snip]... provide exciting and compelling [yet more snip]..."

    I sometimes wonder what it would look like if Verizon PR people had announced Hitler's invasion of Poland and the start of WWII.

    reply to this | link to this | view in chronology ]

  • identicon
    Dave, 18 Sep 2020 @ 12:01pm

    "exciting and compelling" products in the years to come

    Yeah, for executives and shareholders.

    Again.

    And the gravy train just keeps on chugging.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 18 Sep 2020 @ 12:21pm

    Yeah, for executives and shareholders.

    AT&T's binge purchases worked out well for executives and their successors. The shareholders, not so much. Well, not at all. And the employees who like, actually did useful stuff--linesmen and tech support, you know--have been shedding like hair off a mangy dog.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 18 Sep 2020 @ 1:40pm

      Re:

      This is why it pisses me off when they get telco employees to appear on their lying-ass commercial advertisements, such as the current one with VZN engineers bullshitting about 5G (yet again).

      reply to this | link to this | view in chronology ]

  • icon
    ECA (profile), 18 Sep 2020 @ 1:18pm

    What to do?

    HOw many of these corps are going to indebt themselves?

    Over valued corps, Selling over valued Stocks, start to Over buy other smaller companies?
    Wouldnt economics Show that the corp is worth less? Or did they over sell their stocks to cover the Over priced purchase's?

    Tracfone has $8 billion revenue and sells off for $6 billion?

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 18 Sep 2020 @ 8:22pm

      Re: What to do?

      Tracfone doesn't own it's towers. This is probably a case of if they didn't sell, Tracfone would see an increase in their lease payments that would send them into the unprofitable range.

      reply to this | link to this | view in chronology ]


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