Verizon’s Dunne argues for TracFone purchase to FCC’s Rosenworcel

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Jeff Moore, principal of Wave7 Research, said he thinks the Verizon purchase of TracFone will result in reduced choice for prepaid customers. (Wave7 Research photo)

The Federal Communications Commission (FCC) is still reviewing Verizon’s proposed purchase of TracFone Wireless from América Móvil. Recently, Verizon CEO of the Consumer Group Ronan Dunne and TracFone CEO Eduardo Diaz Corona met via teleconference with Acting FCC Chairwoman Jessica Rosenworcel to try and convince her that the transaction is in the public interest.

Their main argument is that a combined Verizon/TracFone will introduce a third facilities-based provider in the prepaid segment to compete against T-Mobile’s Metro and AT&T’s Cricket.

The parties didn’t precisely say how consumers benefit from getting their services from a facilities-based provider as opposed to getting their services from a mobile virtual network operator (MVNO).

Currently, TracFone is an MVNO that uses the network of Verizon and other carriers, but the majority of its nearly 21 million customers already are on Verizon’s LTE network.

If TracFone is owned by Verizon it could potentially save money on wholesale leasing costs.

Diaz Corona said TracFone, under Verizon management, will be more nimble and competitive because it won’t have to negotiate deals with multiple underlying network operators.

Dunne said that after the closing, TracFone customers will be able to remain on their current plans, and TracFone will be able to offer 5G devices and services via Verizon.

Industry analyst Jeff Moore, principal of Wave7 Research, said, “The purchase will result in reduced choice for prepaid customers.” Moore has argued previously that he expects Verizon will consolidate other TracFone prepaid brands such as Telcel America, GoSmart Mobile and PagePlus Mobile.

RELATED: Moore: Prepaid in 2021 – 4 competitive trends to watch

Realistically, one of the main reasons companies like mergers and acquisitions is because they can tap “cost synergies.”

Lifeline

TracFone is a big provider of Lifeline services. Lifeline is a federal program that offers a monthly discount to qualified low-income customers. And Lifeline seems to be the primary hurdle that Verizon and TracFone need to get over. The attorneys general from 16 states and the District of Columbia earlier this year asked the FCC to request additional information from Verizon about its commitment to Lifeline.

RELATED: Verizon’s acquisition of TracFone gets additional review time

The Communications Workers of America (CWA) union also has raised questions about the transaction, saying the FCC should demand a commitment from Verizon to participate in the Lifeline program for a minimum of five years.

Up to this point, Verizon has largely avoided participation in Lifeline. Its website indicates that Verizon Wireless offers the service in parts of just four states. The only infrastructure-based wireless provider that offers a robust Lifeline program is T-Mobile.

In the meeting with Rosenworcel, Dunne said Verizon is firmly committed to TracFone’s Lifeline business and will continue to offer TracFone’s current Lifeline-supported services. Customers will be able to keep their current Lifeline service plans when the deal closes.

Dunne also said that within six months after the transaction closes, Verizon will make available a service plan to Lifeline and other prepaid customers through TracFone that includes 5G service.