There is some major consolidation underway in the Internet communications space that could have implications for Internet access and competition for American consumers. On Thursday, Verizon announced it was acquiring Frontier Communications for $20 billion, more than doubling Frontier's market cap at the close of trading the night before.
Frontier offers internet, phone and TV services. It has also worked with companies like Google and Amazon over the years to bundle other digital services or find new distribution channels. But what Verizon is most interested in is the fiber business, which extends to areas that Verizon doesn't currently cover.
Originally headquartered in Tampa, Frontier now has 2.2 million customers across 25 states, including the lucrative market of Washington, D.C. It is building out its network and plans to grow from 7 million households to 10 million by 2026. Under CEO Hans Vestberg, Verizon has been working to expand its Fios fiber network, which together will cover 25 million households.
This is a somewhat karmic turn of events. In 2009, Frontier acquired some of Verizon’s existing local currency exchange business for $8.5 billion. Adjusted for inflation, that’s about $12.5 billion in 2024.
“The Frontier acquisition is a strategic fit,” Bestberg said in a statement. “It builds on Verizon’s 20-year leadership in fiber, provides an opportunity to strengthen our competitiveness in more markets across the U.S., and enhances our ability to deliver premium service to millions of customers across our integrated fiber network.”
Verizon reiterated its guidance for the year at the same time it announced the acquisition, pointing to another reason for the acquisition: Wireless revenue is expected to grow between 2% and 3.5% (for comparison, it grew more than 8% in 2014), and EBITDA is expected to grow between 1% and 3%. Adding more customers and reach is a bet on the sustainability of fiber and promises to offset those numbers.
