In a significant move to expand its broadband capabilities, Verizon Communications has announced a $20 billion acquisition of Frontier Communications, a deal that CEO Hans Vestberg says will enhance Verizon’s premium broadband services and create more choices for consumers. Speaking exclusively on Squawk Box, Vestberg emphasized that the deal will “accelerate” Verizon’s broadband efforts, helping the company bring its fiber network and wireless services to millions more households across key markets.

“This is a great opportunity for consumers,” Vestberg said. “By acquiring Frontier, we’re extending the reach of our premium fiber network while connecting it with our wireless offerings. It’s about providing better services, faster speeds, and more options for customers.”

Expanding Fiber Footprint and Enhancing Consumer Experience

The acquisition gives Verizon access to Frontier’s vast network of fiber infrastructure, which spans across 24 states and Washington D.C., covering over seven million homes with plans to expand to 10 million by the time the deal closes in early 2025. According to Vestberg, the decision to acquire Frontier rather than continuing to build out Verizon’s infrastructure from scratch was both economical and strategic.

“It was a fairly simple decision between building and buying,” Vestberg explained. “The economics were appealing, especially considering the significant transformation Frontier has undergone in recent years. Today, more than 50% of their revenue comes from fiber services, which made this a compelling asset for us.”

Frontier, originally part of Verizon before being sold off a decade ago, has re-emerged as a key player in the fiber broadband space, with a strong focus on high-speed internet services. Verizon’s acquisition will enable the telecom giant to increase its fiber reach by 50%, adding 15 million new homes to its network, a leap from its current 30 million homes.

A Strategic Fit in a Competitive Market

Vestberg was quick to address concerns about potential regulatory hurdles and antitrust scrutiny, given the scale of the deal. “We believe this is great for consumers, and we’re confident that regulatory approval will go through,” he said, dismissing early skepticism from investors. “This deal provides more competition in the broadband market, especially in areas where we don’t have significant overlap with Frontier’s footprint.”

“The acquisition of Frontier is a strategic fit. It will build on Verizon’s two decades of leadership at the forefront of fiber and is an opportunity to become more competitive in more markets throughout the United States." – @hansvestberg https://t.co/5KoSmOtHng

— Verizon News (@VerizonNews) September 5, 2024

The Verizon CEO highlighted that the acquisition would allow the company to offer not just fiber broadband, but also Verizon’s broader suite of services, including fixed wireless access and its My Home plans. The latter includes perks such as streaming services and home insurance, adding further value to the consumer proposition.

“We’re not just bringing faster internet; we’re bringing better solutions for how people live and work today,” Vestberg said. “By offering fiber, fixed wireless, and premium packages all in one, we’re giving customers more control and more choice.”

Competition and Broader Implications

Verizon’s move to acquire Frontier also positions the company to compete more aggressively with AT&T, a rival with a larger fiber footprint. Although the deal will significantly boost Verizon’s fiber network, analysts note that it still leaves the telecom company covering less than 20% of U.S. households with fiber-based home broadband—a gap that Vestberg acknowledged.

“We are well aware that there’s still room for growth, but with this acquisition, we’re in a unique position to lead,” he said. “With our top-tier wireless services and the expansion of fiber, we’re aiming to meet customers where they are, whether it’s urban, suburban, or even rural areas.”

Color me confused, but Verizon built most of the fiber infrastructure, sold the business off to Frontier (a Verizon spinoff) and are now buying it back?https://t.co/U8gBI9PtvM

— icem4n9099 (@ice9099m4n37149) September 5, 2024

Vestberg also pointed out that the deal marks a significant shift in how Verizon views the broadband landscape, noting that it’s not just traditional fiber competitors they’re up against. “We’re also competing with emerging technologies like satellite internet providers, such as Starlink, and other cable players. This acquisition gives us a broader platform to stay competitive.”

Financial Outlook and Future Plans

On the financial front, Vestberg reassured shareholders that the acquisition will pay off in the long run. “From day one, this deal will contribute to revenue growth, and within 12 months, it will positively impact EBITDA, cash flow, and earnings per share,” he said. “Our balance sheet is strong, and while our leverage will increase slightly, it’s manageable considering the size of Verizon’s equity.”

As for Verizon’s long-term strategy, the CEO emphasized that the company remains focused on its core mission: building a network that can support multiple profitable connections. “Mobility and broadband are essential for every individual and organization. This acquisition is part of our broader strategy to ensure that we’re leading in both,” Vestberg said.

In the meantime, Verizon will continue executing its plans for mobility and fixed wireless services while Frontier proceeds with its goal of passing 10 million homes with fiber.

Deal Accelerates Everything

If approved, the $20 billion acquisition of Frontier by Verizon marks a key moment in the company’s strategy. With its increased fiber footprint, Verizon will strengthen its already strong position in the highly competitive broadband market, offering faster speeds, better services, and more options for millions of new customers.

“This deal accelerates everything we’ve been working toward,” Vestberg concluded. “It’s not just about expanding our network; it’s about providing a superior experience for consumers who increasingly depend on fast, reliable internet for their daily lives.”

P.S. Craig Moffett (in the original tweet I quoted) is the long-time wise old sage among sell-side telecom analysts. Here's more from his note today on the Verizon-Frontier history.

Just delicious. Verizon gets a 10 out of 10 for style points, just like Raygun's break-dancing. pic.twitter.com/nvfp3A57z6

— ₿ΞΞnThereDoneThat Capital 賢い (@BeenThereCap) September 5, 2024