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Verizon sweetens TracFone deal in search of regulatory approval

Verizon promised to offer more services to low-income Americans in an attempt to convince federal regulators to sign off on its proposed $7 billion acquisition of America Movil's TracFone.

And the company may well have managed to move the needle. In conjunction with Verizon's new commitments, a handful of public-interest groups and others – including Public Knowledge, the California Center for Rural Policy and the Communications Workers of America union – said they would retract their opposition to the transaction.

"The public interest groups believe that these conditions adequately address their concerns and withdraw their objections to the transaction contingent on the commission's incorporation of all of Verizon's commitments as enforceable and mandatory in the final order of this proceeding," the groups wrote in a letter to the FCC that was published by Verizon.

"Verizon is eager to serve Lifeline customers, help close the digital divide and increase connectivity for all Americans when we need it most," wrote Verizon's Will Johnson in a post to the company's website detailing Verizon's new commitments.

Specifically, Verizon's new promises involve supporting the US government's Lifeline program. The Reagan administration created the Lifeline program in the 1980s to provide poor Americans with phone service. The program provides recipients with a discount of up to $9.25 per month for telecom services, either wired or wireless. Americans can get the discount if they meet federal poverty guidelines or participate in programs like the Supplemental Nutrition Assistance Program (SNAP, or food stamps).

TracFone – primarily through its SafeLink brand – is a major provider of Lifeline services in the US. Indeed, the company counted around 1.7 million SafeLink customers in the second quarter of this year (though that's a small portion of its roughly 20 million total customers). That's a steep decline from the roughly 2 million SafeLink customers TracFone counted a year ago.

Verizon, in its new commitments around Lifeline and TracFone, said it would:

  • Offer Lifeline services via TracFone for at least three years

  • Continue to offer a Lifeline plan at no charge to the consumer

  • Actively market and advertise Lifeline services

  • Continue supporting TracFone reseller agreements

  • Make 5G available to Lifeline customers, though it did not specify whether such service would include its speedy, "ultra wideband"-branded service or its slower, nationwide 5G service

  • Provide quarterly reports to the FCC about its compliance with the new commitments

As part of the company's efforts to score regulatory approval for its proposed TracFone purchase, Verizon in June said it would sell 5G services to low-income Americans through the government's Lifeline service. However, the company's announcement Thursday essentially formalizes that promise as well as several others.

The FCC has not yet blessed Verizon's proposed purchase of TracFone, and it's unclear whether or when it might do so. TracFone's owner suggested the transaction might close in the third quarter. Verizon's CEO said last month he expects the transaction to close sometime this year.

The transaction is an important one considering TracFone is by far the largest MVNO in the US. It's also one of the nation's biggest providers of prepaid wireless services, and an acquisition of TracFone by Verizon could give Verizon the ability to increase its revenues by moving some of TracFone's prepaid customers onto Verizon's more profitable postpaid service plans.

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