Some major consolidation is afoot in the world of internet communications — and it will have implications for competition and consumer internet access in the United States. On Thursday, Verizon announced that it would gobble up Frontier Communications for $20 billion — more than double Frontier’s market cap at the close of trading the night before.
Frontier offers internet, phone and TV services — it has also partnered with companies like Google and Amazon over the years to bundle other digital services or find new distribution channels. But Verizon’s big interest in the company is its fiber business and the fact that it extends to places that Verizon does not currently cover as well.
Originally based in Tampa, Frontier currently has 2.2 million customers across 25 states, including the lucrative market of Washington, DC. It’s building out its network and plans to touch 10 million homes by 2026, up from 7 million today. Verizon, digging in deep on its telecoms roots under CEO Hans Vestberg, has been working on expanding its own Fios fiber network. Combined, the pair cover 25 million homes.
This is a somewhat karmic turn of events. In 2009, Frontier acquired some of Verizon’s legacy local exchange business for $8.5 billion. Adjusted for inflation, that’s around $12.5 billion 2024 dollars.
“The acquisition of Frontier is a strategic fit,” said Vestberg in a statement. “It will build on Verizon’s two decades of leadership at the forefront of fiber and is an opportunity to become more competitive in more markets throughout the United States, enhancing our ability to deliver premium offerings to millions more customers across a combined fiber network.”
Verizon reiterated its guidance for the year at the same time it announced the acquisition, and that points to another reason for the acquisition. Wireless revenues are due to grow between just 2% and 3.5% (as a point of comparison, they grew more than 8% in 2014), and EBITDA is expected to grow between 1% and 3%. Adding more customers and reach is a bet on fiber’s staying power and promise to offset those figures.
Source @TechCrunch
