Verizon Communications announced a deal to purchase prepaid wireless provider, Tracfone, for $6.25 billion. The buyout would be a cash and stock deal. Tracfone is currently a subsidiary of Mexican telecommunication company America Movil.
Tracfone currently serves 21 million users and has more than 90,000 retail locations in the United States. America Movil was created from a state monopoly and is Mexico’s largest telecoms company. The owner of America Movil is Carlos Slim, the riches man in Latin America.
According to the New York Post, Verizon has not heavily invested in prepaid services unlike T-Mobile which purchased MetroPCS and revamped the brand. Verizon could use the buyout of Tracfone to help Americans cut back on spending.
“This transaction firmly establishes Verizon, through the Tracfone brands, as the provider of choice in the value segment, which complements our clear leadership in the premium segment,” added Ronan Dunne, executive vice president and group CEO, Verizon Consumer Group.
The deal, should it be approved by the DOJ, is split between $3.125 billion in cash and $3.125 billion in stock options.