Following the recent news that Verizon has agreed to acquire Tracfone from América Móvil in a deal valued at nearly $7bn;

Tammy Parker, Senior Analyst at GlobalData, a leading data and analytics company, offers her view on the transaction:

“Verizon has long needed a secondary brand and value proposition that it can use to serve the prepaid wireless market without cannibalizing its premium flagship brand. AT&T has Cricket Wireless and T-Mobile has Metro by T-Mobile. Verizon will gain a substantial base of prepaid subscribers acquired from Tracfone, making it the largest US prepaid service provider.

“Tracfone has performed well in terms of adding customers during the COVID-19 pandemic, but that was not the driver for this acquisition. Verizon signaled its desire to build up a presence in prepaid with the launch of online-only digital brands Visible Wireless and Yahoo Mobile, but those have served as interim solutions until it could find a way to make a bigger splash in the market.

“Given that more than 13 million of Tracfone’s 21 million subscribers are already on Verizon’s network, there will be an easy transition for most of Tracfone’s customers. In addition, Verizon is making a competitive dent in the MVNO businesses of its rivals as it will be taking control of around 7 million MVNO customers that are currently on their networks.

“GlobalData expects Verizon to make significant improvements to the Tracfone business, such as consolidating many of the Tracfone sub-brands under a single brand, though some of the brands, particularly those affiliated with Walmart, may remain untouched.

“GlobalData estimates that the prepaid penetration in the US wireless market is 26% and that penetration rate should remain constant over the next five years.”