In a bid to expand its fiber-optic network, Verizon has agreed to buy communications provider Frontier in a deal valued at about $20 billion, including $9.6 billion in cash.
By Aaron Gregg
Although Verizon offers nationwide wireless service, its fiber network is concentrated mainly in nine states in the Northeast and Mid-Atlantic. Frontier has about 2.2 million fiber subscribers in 25 states and several hundred thousand customers still using copper lines for now.
Frontier’s customers are spread across several Midwestern states, with some dense pockets in Illinois, Ohio, Indiana and West Virginia. Some are also in California and Texas, according to a map provided by the two companies.
The acquisition “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 chief executive Hans Vestberg said in a statement.
The deal is expected to close in 18 months.
Verizon has been working to expand its own fiber-optic network, which enables the internet, phone and TV services that it sells under the Fios brand.
The company needs more fiber-optic cables to support its network of cell towers, according to Armand Musey, president of the consulting firm Summit Ridge Group. Installing that infrastructure on its own would be expensive, but the deal announced this week may allow Verizon to subsidize that investment using revenue from Frontier’s fiber broadband subscribers, Musey said in an email to The Washington Post.
The tie-in with Verizon would be a return of sorts for certain assets of Frontier, which had bought pieces of Verizon’s copper wire-based network in multiple transactions over the past several years, including divisions that serviced 4.8 million phone lines in 14 states in 2009. Frontier’s strategy didn’t work out in the near term — the company filed for Chapter 11 bankruptcy in 2020, although it went public the following year after emerging from restructuring.
Verizon’s competitors have also been investing in fiber-enabled networks. On Wednesday, AT&T announced a partnership with Little Rock-based Kinetic, which boasts an 18-state footprint of fiber-based broadband service focused on rural areas. T-Mobile in July announced plans to acquire Metronet, which has a business-focused fiber broadband offering.
Some analysts are skeptical about a large-scale “convergence” of fiber-based and wireless networks, with companies selling services bundled together. Industry analysts Craig Moffett and Nick Del Deo on Thursday called the strategy “an absolutely atrocious idea.”
“There is simply no path forward for Verizon to cobble together a meaningful wireless coverage map, and a national wireless network basing its strategy on convergence with wireline fiber that is available to just a small fraction of American homes, with no conceivable path to broad coverage, is an awful strategy,” Moffett and Del Deo wrote in a note to investors.
Shares of Verizon fell 0.4 percent Thursday, while Frontier fell 9.5 percent Thursday morning after jumping 34 percent the day before, when the Wall Street Journal reported on a possible deal. Under the terms of the deal, Verizon will pay $38.50 for Frontier shares, a 37 percent premium over the company’s Tuesday closing price.
