Although multiple entities are calling on regulators to impose conditions on Verizon’s nearly $7 billion acquisition of TracFone, executives continue to believe the deal will close in the second half of this year.
Asked about progress on the deal and what's happening in Washington, D.C., Verizon CEO Hans Vestberg said during Verizon’s quarterly conference call on Wednesday that the expectation is the same as it was when the transaction was announced last fall.
“Everything we said from the beginning is holding true. The process is continuing as expected,” and Verizon still expects it will be approved in the second half of 2021. “We think it’s going to be somewhere in the third quarter,” he said. “It’s progressing as we expected.”
Last week, the FCC sent a long list of questions for Verizon to answer around the deal, including how it intends to serve Lifeline customers and migrate customers who are on non-Verizon networks. TracFone, currently owned by América Móvil, sells multiple brands of prepaid service through MVNO arrangements with facilities-based operators. Most of its 20 million customers are on the Verizon network, but an estimated 7.6 million use the networks of other service providers.
The Communications Workers of America (CWA) union, as well as other groups, have been pressing the FCC to impose conditions on the acquisition to protect Lifeline customers, as well as to ensure the MVNO/reseller market remains competitive.
Verizon added 19,000 prepaid net adds during the first quarter of 2021, a reversal of what it saw in the fourth quarter of 2020, when it lost 50,000 prepaid customers. Verizon added prepaid customers in the second and third quarters of 2020, which came after 10 consecutive quarters when it lost prepaid subscribers, according to 556 Ventures.
Cable MVNO deals
Last week, Comcast announced new, more competitive Xfinity Mobile plans, offering discounts on unlimited plans as customers add more lines. Analysts at New Street Research said they suspect the new plans are a result of Comcast’s renegotiated MVNO deal with Verizon. Both Comcast and Charter Communications use Verizon’s network through MVNO arrangements and underwent renegotiations last year.
Asked about the recent negotiations with the cable MVNOs, Vestberg said he couldn’t go into detail about any commercial agreements but said Verizon views its cable MVNOs as enterprise customers.
“We feel good about our Network as a Service strategy,” he said. The company has its own premium brand with Verizon and the MVNOs are addressing other sectors. “For us, this is accretive. We have a good relationship with our MVNO partners. We see them as enterprise customers.”
Ultimately, “we start building new markets, with Visible and later on this year, with TracFone, and then we have an unparalleled position to anyone else in the market to be growing... I feel good about the relationship with MVNOs. We treat them as important enterprise customers and we will continue to do so.”
About that 5G coverage…
T-Mobile had a bit of fun at Verizon’s expense on Tuesday when it launched its most recent installment of its “If 5G Were…” series using blankets to show the differences between T-Mobile’s 5G coverage and that of rivals AT&T and Verizon. Noting that earnings season kicks off this week, T-Mobile said its 5G network is over 2x the size of AT&T’s and nearly 4x the size of Verizon’s.
During Verizon’s earnings call, Vestberg said Verizon continues to expand its Ultra Wideband coverage, which uses millimeter wave spectrum. It deployed 3,600 new Ultra Wideband sites in the quarter, now up to nearly 21,000 sites on air and on track to reach 30,000 by the end of this year.
In terms of C-band, the operator has already ordered half of the total network equipment needed from its 5G suppliers for deployments in 2021. The satellite operators are on track to clear the spectrum during the third and fourth quarters for the first tranche of spectrum, according to Vestberg.
He said Verizon’s network team is deploying more assets than ever before: millimeter wave, C-band, 4G, 5G and fiber. “I have a lot of confidence that this team will accelerate our network leadership,” he said.
That’s notable because Wall Street analysts continue to say that it looks like Verizon is losing its network leadership to T-Mobile in the 5G era. T-Mobile has more spectrum and it’s deploying mid-band 2.5 GHz spectrum sooner than Verizon can get its hands on C-band 3.7 GHz spectrum.
“T-Mobile’s low frequency strategy (600 and 700 A-block) is steadily eroding Verizon’s long-held advantage in rural America, where they and AT&T have faced no serious competition for years,” wrote MoffettNathanson analyst Craig Moffett in a Wednesday report for investors.
“All this wouldn’t matter if Verizon’s prices were as low as T-Mobile’s. But they aren’t. Even Comcast, which cut its family plan prices last week, is looking like a more serious competitor,” Moffett wrote. “To be sure, Verizon’s network will still be ‘very good.’ But will that be ‘good enough’?”