California greenlights Verizon’s TracFone acquisition

California’s Public Utilities Commission has approved Verizon’s plan to acquire TracFone, but with a few strings attached.

In September 2020 Verizon announced that it had reached the agreement to buy TracFone, the pre-paid subsidiary of the Mexico-based operator América Móvil in a deal that could be worth nearly $7 billion.

The proposed acquisition has received considerable pushback. In February this year, a group of 17 Attorneys General demanded that FCC should scrutinise the deal more closely. Their main concern is the acquisition could put at risk many TracFone subscribers’ access to LifeLine, an FCC program to subsidise communication services for low-income consumers.

Verizon had told the media earlier that it would “continue to offer Lifeline service through TracFone and further develop its core brands, products and distribution channels” without going into much detail. The agreement just reached in California between the state regulator and the parties involved in the acquisition deal made the vague promise more specific. The agreed measures include:

  • TracFone or Verizon must participate in California LifeLine for 20 years after the close of the transaction.
  • TracFone and Verizon must enrol at least 200,000 California LifeLine subscribers by December 31, 2025.
  • By December 31, 2023, at least 15 percent of California LifeLine subscribers must be in low-income disadvantaged communities.
  • TracFone or Verizon must offer LifeLine customers a phone at no cost, including 5G phones after the first year of the merger, in locations where Verizon currently offers 5G retail services.
  • TracFone or Verizon must offer plans with comparable voice, text, and data at the same or a lower price as TracFone currently offers for a total of five years following the close of the transaction.
  • All Verizon branded stores must advertise and offer enrolment in the California LifeLine program.

Given California’s size as a market and its symbolic significance across the country, this agreement can be seen as a big hurdle cleared by Verizon.

It also gives the state regulator a good chance to claim a job well done. “Our Decision imposes several important consumer protection conditions, beyond what the companies proposed in their application, to ensure that low-income customers in particular benefit from the merger,” said Clifford Rechtschaffen, a CPUC Commissioner.

“I appreciate the steps this Decision has taken to ensure that LifeLine continues to be provided to TracFone’s existing customers and that Californians will have even greater access to the LifeLine program through this acquisition,” added Genevieve Shiroma, another Commissioner.

The deal was expected to close by the end of 2021. Neither Verizon nor América Móvil has updated the schedule.

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