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Verizon is buying Tracfone to claim an edge in prepaid phone carriers

It could help as people move to low-cost phone service during the pandemic.

Published onSeptember 14, 2020

Verizon Wireless logo stock image 1
  • Verizon has bought prepaid carrier Tracfone for $6.25 billion.
  • The acquisition could give it an edge over rivals for low-cost phone service.
  • If approved, the deal will close in the second half of 2021.

People are moving to lower-priced phone plans due to both the pandemic and an abundance of “good enough” service, and major carriers are capitalizing on that shift. Verizon (disclaimer: this author also writes for Verizon-owned Engadget) has announced that it’s buying prepaid provider Tracfone for the equivalent of $6.25 billion to help it corner low-cost phone service.

The buyout will help Verizon appeal to people wanting “value wireless plans” and expand Tracfone’s reach, including support for 5G and fixed wireless internet access. The network still intends to offer subsidized Lifeline service for low-income Americans, and brands like Straight Talk will remain intact.

Read more: Why cellphone plans are so expensive

The expansion would add another 21 million subscribers to Verizon’s ranks, 13 million of which already use Verizon’s network. It also gets access to a wider retail footprint that includes 90,000 locations, including stores like CVS and Target.

If regulators approve the deal, Verizon should complete the acquisition by the second half of 2021.

This isn’t a completely unexpected move. On top of the effects of COVID-19, the network is also facing stiff competition from the likes of AT&T’s Cricket and T-Mobile’s Metro. Verizon will take control of some of the most affordable service in the US by buying Tracfone, not to mention get brands that are more closely associated with prepaid than its own.

This might not make everyone happy, though. Pro-competition advocates and politicians were already worried about T-Mobile’s takeover of Sprint. If Verizon successfully buys Tracfone, it will further consolidate the market and reduce your choices.

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