Verizon to buy Frontier for $9.6 billion under broadband program

Verizon Communications Inc. has agreed to buy rival telecom operator Frontier Communications Parent Inc. for about $9.6 billion, as the New York-based telecom giant looks to expand its high-speed Internet business.

Frontier investors will receive $38.50 per share, a 37% premium to the $28.04 closing price Tuesday, the day before news of the pending deal broke, Verizon said in a statement Thursday. The deal values ​​the Dallas-based company at $20 billion, including debt. Frontier shares rose 38% Wednesday after the Wall Street Journal first reported the companies were in talks on a deal. They fell 8.6% when the market opened in New York on Thursday at $35.35, below the offer price. Verizon was little changed.

Telecom companies like Verizon are ramping up fiber-optic resources to increase capacity for growing customer data usage as revenue from their wireless business declines. The flow of data is set to increase even more as more companies adopt artificial intelligence. In July, T-Mobile said it was investing $4.9 billion in a joint venture with private equity firm KKR & Co. to buy fiber-optic internet service provider Metronet.

The Verizon transaction combines Frontier’s fiber network with Verizon’s portfolio of fiber and wireless assets, including Fios. Over the past four years, Frontier has invested $4.1 billion to upgrade and expand its fiber network. Its 2.2 million fiber subscribers in 25 states will join Verizon’s nearly 7.4 million Fios customers in nine states and Washington, D.C. Verizon plans to build an additional 2.8 million fiber sites by the end of 2026, bringing Frontier’s total to 7.2 million, the companies said.

Verizon Chief Executive Hans Vestberg said the acquisition would allow the company to “become more competitive in more markets” in the U.S.

Verizon’s move “would mark a much deeper commitment to its fiber broadband strategy and future-proof its high-speed internet footprint with the best long-term medium for delivering services,” Bloomberg Intelligence analyst John Butler wrote Wednesday after reports of the impending takeover. “The deal would put Verizon’s fiber subscribers ahead of rival AT&T, increasing its base to 9.1 million compared with the latter’s 8.8 million.”

The Verizon and Frontier boards have approved the deal, which is expected to close in about 18 months if shareholders and regulators approve it. Verizon also reaffirmed its full-year guidance in a statement. The deal is expected to be accretive to revenue and adjusted earnings before interest, taxes, depreciation, and amortization upon closing, according to the companies. It is expected to be accretive to earnings per share starting in 2027. Verizon is forecasting at least $500 million in cost synergies on a current basis by the third year.

Frontier initiated an internal review of its business earlier this year. The company has faced pressure from activist investor Jana Partners to improve its earnings. It has reported sales of $5.8 billion in 2023, with about 52% of total revenue coming from its fiber-optic products business.

In 2015, Verizon sold parts of its landline business in California, Florida and Texas to Frontier for $10.54 billion. Frontier filed for Chapter 11 bankruptcy protection in 2020 as debt mounted after years of losses in its wireline telecommunications business. It emerged from bankruptcy the following year and focused on expanding its fiber network to better compete with cable and wireless companies.