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Verizon Inks Deal to Buy TracFone, Eyes Value Mobile Segment

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Verizon Communications Inc. (VZ - Free Report) has inked an agreement to acquire TracFone Wireless, Inc. — a subsidiary of Mexico’s largest telecommunications company, America Movil (AMX - Free Report) . Headquartered in Miami, FL, TracFone is a leading prepaid and value mobile provider in the United States, offering products and services under several brands.

The deal has been valued at $3.125 billion in cash and $3.125 billion in Verizon’s shares. It also includes up to an additional $650 million in future cash consideration. The transaction, subject to regulatory approvals and customary closing conditions, is expected to close in the second half of 2021.

The acquisition is going to expand the New York-based telecom giant’s portfolio into the value segment while complementing its leadership in the premium segment. It will bring enhanced access to Verizon’s wireless network and a suite of mobility products and services to a new customer base. The company expects to drive significant benefits and network synergies from this important buyout.

TracFone is the largest reseller of wireless services in the country. It serves almost 21 million subscribers across a network of more than 90,000 retail locations. As a long-time partner of Verizon, more than 13 million TracFone’s customers depend on Verizon’s wireless network under a wholesale agreement.

Following the merger, Verizon plans to bring its 4G LTE, 5G networks and other innovative technologies to TracFone’s customers. The takeover aligns with Verizon’s growth-oriented Network as a Service strategy. The portfolio of TracFone’s brands creates a platform for growth and innovation in Verizon’s support of the value and low-income segments.

As a result, more U.S. consumers will have access to wireless plans with better experiences. Verizon will continue to offer Lifeline service through TracFone and further develop its core brands, products and distribution channels. Verizon expects the transaction to be accretive in the first full year following closing, excluding transaction and integration costs.

The company’s shares have added 18.3% in the past six months compared with 17.4% growth of the industry.

Verizon carries a Zacks Rank #3 (Hold), at present.

A couple of better-ranked stocks in the broader industry are Turtle Beach Corporation (HEAR - Free Report) and Vocera Communications, Inc. (VCRA - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Turtle Beach delivered a trailing four-quarter positive earnings surprise of 41%, on average.

Vocera delivered a trailing four-quarter positive earnings surprise of 70%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.

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