Verizon intends to expand its broadband business by purchasing Frontier for $9.6 billion

UNITED STATES: The largest phone carrier in the United States, Verizon Communications Inc., has agreed to pay around $9.6 billion to acquire rival Frontier Communications Parent Inc. in order to grow its high-speed internet business.

Verizon announced in a statement on Thursday that Frontier’s stockholders will receive $38.50 per share, which is a 37% premium to the closing price on Tuesday—the day before word of a potential deal broke. The Dallas-based corporation is valued at $20 billion in the sale, including debt.

Grow In Data Flow

In order to accommodate their consumers’ increasing data usage, telecommunications corporations such as Verizon are investing more in fiber-optic infrastructure. Data flow is anticipated to grow even faster as more businesses use artificial intelligence.

T-Mobile US Inc. announced in July that it will acquire fiber-optic internet service provider Metronet for $4.9 billion in a joint venture with private equity company KKR & Co. Through the agreement, Verizon’s fiber network and wireless assets, notably its Fios service, will be combined with Frontier’s fiber network.

Additionally, some of the assets that Verizon paid $10.54 billion to Frontier in 2015 are returned. However, Verizon Chief Executive Hans Vestberg stated in an interview that those were “a totally different type” of asset, based on a separate standard.

Frontier has spent $4.1 billion modernizing its network and swapping out outdated copper connections during the course of the previous four years. Fiber products now account for over 50% of Frontier’s sales, according to Vestberg. Alongside Verizon’s almost 7.4 million Fios customers in nine states and Washington, D.C., comes its 2.2 million fiber subscribers spread over 25 states.

Increase in revenue

On Thursday, Frontier’s stock fell 9.5% in New York, below the asking price as analysts factored in a protracted regulatory investigation and the unlikely prospect of a rival offer. Verizon had not altered much.

The acquisition has been approved by the boards of Verizon and Frontier. If shareholders and regulators accept it, it is anticipated to completion in approximately 18 months. In the release, Verizon also restated its full-year guidance.

The businesses anticipate that following closure, the deal will increase revenue and adjusted profits before interest, tax, depreciation, and amortization. Earnings per share are anticipated to rise beginning in 2027. By the third year, Verizon estimates annualized cost synergies of at least $500 million.

Earlier this year, Frontier started an internal examination of its operations. Jana Partners, an activist investor, has put pressure on the corporation to increase its returns.