Home Blog 2020 The Latest Seismic Shift in the U.S. Mobile Market
Sep 15, 2020

Verizon Steps Up; Buys Tracfone

Subscribe to our blog

Verizon is buying prepaid mobile phone operator Tracfone in the latest seismic shift in the U.S. mobile market. The deal, reportedly worth $6.25 billion, will add 21 million subscribers to Verizon’s base and – far more importantly – strengthen Verizon’s prepaid portfolio which has always been relatively weak compared to the other major carriers. T-Mobile has Metro, AT&T has Cricket and now, Verizon will have Tracfone.

But it’s not quite as simple as that: while Verizon is adding 21 million subscribers, it was already making money off a large number of these (13 million) subscribers through a wholesale agreement with Tracfone, which does not own its own network, but rather wholesales from the main carriers. So the increased Verizon subscriber base will not result in quite as much revenue as a simple one plus one merger. That being said, with nearly two-thirds of the Tracfone base already using Verizon-compatible devices, the headache of merging the Tracfone customer base into the Verizon fold is significantly lower than a typical carrier merger would be. At the same time, the other carriers will take a hit in wholesale revenue, as both AT&T and the new T-Mobile also have wholesale agreements to support Tracfone and we can expect those to disappear at some point soon after the merger’s consummation, impacting both carriers’ bottom lines. Further, we can expect Verizon to come out of the acquisition process with guns a-blazing, upgrading Tracfone’s available network (5G anyone?) and generally making the carrier even more competitive.

While the deal will certainly increase pressure on T-Mobile and AT&T, the biggest impact may be felt by Dish, which now owns the Boost Mobile brand. Still in the process of developing a comprehensive mobile strategy, Dish will probably face a more aggressive prepaid focus from Verizon, as well as from the other two major networks looking to defend their turf against potential moves from the combined Tracfone/Verizon entity.

But that is likely 12 months from now, so Dish should have time to benefit from any upheaval caused by the merger. It could be a case of a short-term benefit (for Dish) with a longer term concern. In that case, it comes down to how quickly Dish can react to this news to make the most of any opportunity. And, of course, let’s not forget the obligatory regulatory hurdles that Verizon and Tracfone must overcome. But that should be a relatively smooth process: yes, this takes a competitor out of the market, but Tracfone does not own its own network so it could be argued that as a virtual operator the impact is less on the competitive landscape. Time will tell.


Stay current in your industry
SUBSCRIBE


Half of U.S. Consumers Own At Least One Smart Home Device, Reports NPD
Half of U.S. Consumers Own At Least One Smart Home Device, Reports NPD

According to NPD, half of U.S. consumers own at least one smart home device, up from 35% in January of 2020. While security cameras remain the most commonly owned smart home device, the largest sales gains in 2020 were seen in security systems, smart garage door openers, and smart lighting.

Downsizing Smartly
Downsizing Smartly

NPD Connected Intelligence President, Eddie Hold, takes a look at how renting vs. buying impacts smart home device ownership and usage.

NPD Forecast: Canadian Consumer Technology Sales in 2020 Hit Record Highs as the Industry Prepares for Post Pandemic Expansion
NPD Forecast: Canadian Consumer Technology Sales in 2020 Hit Record Highs as the Industry Prepares for Post Pandemic Expansion

2020 was a year of historic growth for the Canadian consumer technology industry with sales up 18% totaling $11.1 billion, according to The NPD Group.

Hear the Difference: Audio Trends in North America
Hear the Difference: Audio Trends in North America

We’re turning up the volume on differences in audio trends across the U.S., Canada, and Mexico. Marketers in the tech industry can explore our Retail Tracking Service data to understand that what works in one part of North America may not be the solution in another.

Newsletter

Subscribe and get key market trends and insights relevant to your industry each month.

We will not sell your information. View privacy notice. | Cookie Settings