Verizon gains FCC approval for Tracfone acquisition

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Within six months of the Tracfone deal closing, Verizon must offer Lifeline plans with 5G

It’s an early Christmas present, of sorts, for Verizon: The Federal Communications Commission has officially approved the carrier’s acquisition of prepaid MVNO Tracfone, subject to a number of provisions designed to protect consumers.

Verizon announced in September of 2020 that it had struck a deal to pay up to $6.9 billion to buy Tracfone from Mexico’s América Móvil, expanding its focus on low-cost and prepaid services and saying that it will eventually offer 5G access to Tracfone customers.

Tracfone is the largest wireless reseller in the U.S. and serves more than 20 million subscribers, with more than half of those using Verizon’s network through an existing wholesale agreement. Tracfone products are available in more than 90,000 retail locations across the U.S., and the company operates a number of subsidiary brands including StraightTalk, Total Wireless, Walmart Family Mobile, NET10 Wireless, SIMPLE Mobile and others.

The FCC noted that among Tracfone’s customers are about 1.7 million prepaid Lifeline customers, whose service costs are discounted for qualifying individuals based on income. Only one Lifeline service is allowed per household.

Based on analysis of thousands of pages of documentation, the agency said in its opinion and order on the acquisition, the proposed transaction “has the potential to cause some public interest harms.” In particular, the FCC said, Tracfone is “one of the most significant participants in the Lifeline program, and the evidence points to potential harm to Tracfone’s Lifeline-eligible and other low-income customers, especially in geographic markets outside Verizon’s coverage area.” Becoming the owner of Tracfone could also give Verizon reason to raise wholesale prices for competing MVNOs which also serve the low-income customer segment, the agency added.

The FCC ultimately concluded, though, that a series of “demanding conditions” and an oversight period of more than seven years from the close of the transaction would “adequately address” the concerns. “Considering that the transaction also will yield some benefits (in the form of lower marginal costs) for Tracfone, on balance, we are able to find that the proposed transaction serves the public interest,” the FCC said.

Among the conditions stipulated by the FCC, Verizon must:

-Offer Tracfone’s Lifeline services in the same service areas for at least seven years.

-Within six months of the close of the transition, make a 5G plan available to new and existing Lifeline customers and offer “a range of cost-effective 5G devices” to those customers.

-Continue to offer and advertise (including meeting a specific level of marketing expenditures) existing Lifeline plans, with no additional co-pays, for at least three years.

-Maintain Tracfone’s existing MVNO agreements and service plans for customers outside of Verizon’s network coverage areas, including Puerto Rico, for three years.

-Provide existing MVNO wholesale customers with an option to extend those agreements under the same terms, with certain limitations, on a month-to-month basis for three years after the close of the transaction.

-Extend its 60-day unlocking periodto all 700 MHz C Block devices purchased from
Tracfone and activated on the Verizon network, and provide notice of that policy to customers.

-Offer a free, compatible device or SIM card to Lifeline customers who have to be transitioned onto Verizon’s network, and notify customers at least twice of the approaching transition.

-Maintain a dedicated Lifeline website with information about plans and outreach.

“Verizon welcomes the FCC’s approval today of our Tracfone acquisition. The deal will provide customers with the best of both worlds: more choices, better services and new features thanks to Verizon’s investment and innovation. Customers will benefit with enhancements in devices, network performance and innovative products and services — as well as a continued commitment to Lifeline,” saidKathy Grillo, Verizon SVP and DGC of public policy and government affairs, in a statement, adding, “We will work hard to serve Tracfone’s current customers and look forward to serving new ones in this dynamic and fast-growing marketplace.”

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