Verizon to buy Frontier for $9.6 billion in push to expand its broadband business

Verizon Communications Inc. agreed to buy rival telecommunications operator Frontier Communications Parent Inc. for about $9.6 billion as the New York phone giant looks to expand its high-speed internet business.

Frontier’s investors will get $38.50 a share, a 37% premium to the $28.04 closing price on Tuesday, the day before news of a pending deal came out, Verizon said in a statement on Thursday. The transaction values the Dallas-based company at $20 billion including debt. Frontier shares had surged 38% on Wednesday after the Wall Street Journal first reported that the companies were in talks for a deal. They slid 8.6% as the market opened in New York on Thursday to $35.35, below the sale price. Verizon was little changed.

Telecommunications companies like Verizon are bulking up on fiber assets to add capacity for customers’ surging data use as revenue from wireless phone operations slows. The flow of data is expected to increase further as more companies adopt artificial intelligence. In July, T-Mobile said it would invest $4.9 billion in a joint venture with private equity firm KKR & Co. to buy fiber-optic internet service provider Metronet.

The Verizon deal combines Frontier’s fiber network into Verizon’s portfolio of fiber and wireless assets, including its Fios offering. Over about the past four years, Frontier has invested $4.1 billion upgrading and expanding its fiber network. Its 2.2 million fiber subscribers across 25 states will join Verizon’s nearly 7.4 million Fios customers in nine states and Washington D.C. Verizon plans to build out an additional 2.8 million fiber locations by the end of 2026, adding to Frontier’s 7.2 million sites, the companies said.

Verizon Chief Executive Hans Vestberg said the takeover will allow the company to “become more competitive in more markets” in the US.

The move by Verizon “would mark a much deeper commitment to a fiber broadband strategy and future-proof its high-speed internet footprint with the best long-term medium for delivering the service,” Bloomberg Intelligence analyst John Butler wrote Wednesday after news reports of a pending acquisition. “A deal would put Verizon’s consumer fiber subscribers ahead of rival AT&T by lifting its base to 9.1 million vs. the latter’s 8.8 million.”

The boards of Verizon and Frontier have approved the deal, which is expected to close in about 18 months if shareholders and regulators agree to it. Verizon also reaffirmed its full-year guidance in the statement. The transaction is expected to be accretive to revenue and adjusted earnings before interest, tax, depreciation and amortization growth rates upon closing, according to the companies. It’s expected to be accretive to earnings per share starting in 2027. Verizon sees at least $500 million of run-rate cost synergies by the third year.

Frontier initiated an internal review of its business earlier this year. The company has faced pressure from activist investor Jana Partners to improve its returns. It reported sales of $5.8 billion in 2023, with about 52% of total revenue from activities related to its fiber-optic products.

In 2015, Verizon sold parts of its landline phone business in California, Florida and Texas to Frontier for $10.54 billion. Frontier filed for Chapter 11 bankruptcy protection in 2020 as debt piled up after years of losses in its wireline telecom business. It emerged from bankruptcy the following year and focused on building out its fiber network to better compete against cable and wireless companies.