- The purchase of Frontier could cost Verizon about $7 billion
- Until now, Verizon hasn’t seemed that interested in more fiber, beyond its existing Fios footprint
- But there’s been a lot of speculation that the three big wireless carriers will compete for fiber assets
The Wall Street Journal is reporting today that Verizon is on the verge of buying Frontier Communications for as much as $7 billion in a deal that could be announced this week.
Verizon’s CEO for the Consumer Group Sowmyanarayan Sampath was scheduled to speak at the Mobile Future Forward conference tomorrow, and he canceled at the last minute, which may be a sign that this deal is imminent.
The analysts at New Street Research led by Jonathan Chaplin said Verizon’s rationale for the purchase is “convergence baby.” In fact, Verizon CEO Hans Vestberg was challenged on the company’s second quarter 2024 earnings call by analysts who questioned whether Verizon had a big enough fiber footprint to compete in the future.
Verizon has about 18 million fiber locations, growing at about 500,000 per year, compared to AT&T’s 27.8 million fiber passings, growing at 2.4 million per year, plus more locations passed via its Gigapower joint venture.
Even T-Mobile has gotten into the fiber business, most recently announcing it was teaming up with the investment firm KKR to acquire the fiber provider Metronet.
The New Street analysts wrote, “Verizon seemed complacent. No longer.”
But they added, “If Verizon takes convergence seriously, they needed to do some big acquisitions to catch up. This one isn’t enough; we suspect there will be more to come.”
Speaking at a Bank of America conference today, Sampath said when Verizon bundles Fios with wireless, it sees a 50% reduction in mobile churn and a 40% reduction in broadband churn. He said they don’t see the same benefits with fixed wireless access.
Verizon’s rhetoric shift
The New Street analysts said Sampath’s comments today “marked a shift in rhetoric from: ‘convergence is important, but we can do it with FWA.’”
After its annual summer conference in August in Boulder, Colorado, the analysts at TD Cowen, led by Michael Elias, said there was a lot of conversation about the wireline-wireless “convergence” frenzy.
“We believe convergence is a race to the bottom, but if one player is going in with a slight advantage (AT&T), the others must reluctantly follow,” wrote TD Cowen. As such, in the mid-term they speculated that T-Mobile might look at fiber roll-ups with Ziply or Lumen or other regional players.
On the Frontier
Headquartered in Dallas, Texas, Frontier is the nation’s fourth-largest incumbent local exchange carrier (ILEC). It has a 25-state footprint and serves largely rural areas.
Other potential fiber companies that the big three wireless carriers might be eyeing include Google Fiber, Windstream, Stealth Communications and TDS Telecom.
In May, the private equity companies DigitalBridge and Crestview submitted an unsolicited offer to purchase the cable company WideOpenWest (WOW!). Bill Major, CEO of the fiber operator FiberLight, told Fierce Network at the time that he expects quite a bit of consolidation in the broadband market in the next few years, especially among regional players.
The analysts at New Street wrote today, “We have been arguing for a couple of years that all the fiber assets would eventually be rolled up into the three big national carriers. We always knew that if one carrier started the process, others would have to follow swiftly because there are three wireless carriers and only one fiber asset in every market with a fiber asset.”
