What Verizon’s Tracfone Acquisition Means for US Smartphone Market

On November 23, the FCC finally approved Verizon’s acquisition of Tracfone from América Móvil, closing a deal that was first announced in September 2020. Through the $6.9-billion deal, Verizon will gain over 20 million prepaid subscribers, vaulting Verizon ahead of competitors AT&T and T-Mobile in terms of total prepaid subscribers. It also increases Verizon’s existing lead in total subscriber count. What remains to be seen is how Verizon’s acquisition will transform the US smartphone market and mobile landscape.

Verizon Tracfone AcquisitionThrough this acquisition, Verizon also gains a massive retail footprint of over 90,000 locations. Tracfone brands are popular at national retailers like Walmart, Target and Best Buy and also sell in stores like Kroger and Dollar General. They primarily appeal to low-income customers, with the sub-$100 segment being the sweet spot.
The Verizon acquisition is likely to have an immediate impact on that market. First and foremost, it will exacerbate the ongoing low-end shortages. The chip shortage has been significantly holding back sales of low-end devices as suppliers struggle to meet demand. While roughly 13 million of Tracfone’s customers are already on Verizon’s network and have Verizon compatible devices, the rest are currently on AT&T and T-Mobile’s networks and will need to be migrated. This will require millions of low-end devices that are compatible with Verizon’s network, which will be difficult to find considering the shortages.
While adding to the low-end supply woes caused by the chip shortage, Verizon’s expansion in the prepaid market is likely to help 5G penetration. Verizon has been a major proponent of 5G mmWave technology. It will put pressure on OEMs to bring mmWave-capable devices to the low-end segment, which have remained restricted to the mid and premium segments due to the cost of components. Additionally, Verizon is likely to feature promotions that encourage subscribers to switch to 5G capable devices and more expensive plans. This should drive 5G penetration deeper into the low end of the market.

To learn more about how Verizon’s Tracfone acquisition will impact the US market, see our full report on the subject here. The report examines the impact of the acquisition on OEM competition within Tracfone, 5G penetration, service prices, and more.