Verizon Reportedly Close to Acquiring Frontier in Major Fiber Expansion Move

Verizon is reportedly on the verge of finalizing a deal to acquire Frontier Communications, according to a report by The Wall Street Journal (WSJ).

The acquisition would align with Verizon’s strategy to strengthen its fiber and mobile network integration, potentially spurring more mergers and acquisitions in the fiber space among Verizon, AT&T, and T-Mobile.

According to WSJ, Verizon is in advanced negotiations to purchase Frontier Communications, a telecom company that emerged from bankruptcy in 2021. Frontier has focused heavily on a turnaround strategy, centered on upgrading 10 million locations with fiber infrastructure.

A formal deal could be announced as early as this week, with estimates suggesting a value of $18 billion, as per KeyBanc Capital Markets analyst Brandon Nispel.

Potential Counterbids and Industry Impact

Industry analysts predict that the acquisition could provoke counterbids from competitors like AT&T and T-Mobile, setting off a wave of mergers and acquisitions within the fiber industry. Jonathan Chaplin of New Street Research highlighted the likelihood of such competitive moves, noting the strategic importance of fiber assets for the three major telecom carriers.

Frontier’s Fiber Push and Verizon’s Strategy

Frontier, which has a significant portion of its assets originating from Verizon’s former wireline business, has deployed fiber to more than 7 million locations, including regions in California, Florida, and Texas. In Q2 of 2024 alone, Frontier added 388,000 new fiber passings, further solidifying its position in the market.

For Verizon, acquiring Frontier would offer a strategic advantage, boosting its fiber network footprint and helping it better compete with AT&T, which has been aggressively expanding its fiber network with over 28 million fiber locations. Verizon’s current fiber base stands at 18 million locations, growing by about 500,000 annually.

Market Reactions and Broader Implications

The news of a potential acquisition has already influenced the stock market, with Frontier's shares soaring by 37.77%, while Verizon’s shares saw a slight dip of 3.62%. The acquisition also comes as Frontier conducts a comprehensive review of its business, exploring partnerships, mergers, and divestitures.

Strategic Fiber and Mobile Convergence

Analysts believe that acquiring Frontier would significantly strengthen Verizon’s fiber-mobile convergence strategy. New Street Research’s Chaplin mentioned that bundling fiber services like Fios with mobile offerings reduces customer churn by 50% for mobile and 40% for broadband.

AT&T, on the other hand, is well ahead in the fiber race, with a joint venture, Gigapower, aiming to extend fiber to an additional 1.5 million locations. Verizon’s acquisition of Frontier could mark a pivotal moment in its efforts to become a fully converged fiber and mobile operator.

Fiber Asset Mergers Expected to Accelerate

As the race for fiber assets heats up, industry experts predict that mergers and acquisitions in the fiber sector will continue to accelerate. Chaplin noted that while many expected large-scale deals to happen around 2025 or 2026, the acquisition of Frontier could speed up this timeline, prompting other telecom giants to act swiftly.

T-Mobile has also entered the fiber game, with smaller acquisitions of Lumos and Metronet. Although these deals were relatively small, they might have signaled the beginning of a larger scramble for fiber assets.

The fiber M&A race has begun, and it’s expected that investors will shift their focus to companies like Lumen, which holds 3.67 million fiber locations and could be a prime target in the future.