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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Companies: tracfone, verizon

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Comments on “Verizon Buys Tracfone As U.S. Wireless Gets Even More Consolidated”

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15 Comments
Anonymous Coward says:

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.

Rekrul says:

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…

Anonymous Coward says:

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.)

Smartassicus the Roman says:

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.

ECA (profile) says:

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?

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