The California Public Utilities Commission (CPUC) on Thursday voted to approve Verizon’s acquisition of TracFone with conditions.
The deal, valued at nearly $7 billion, still must be approved by the Federal Communications Commission (FCC), but the CPUC’s approval marks one of the last big hurdles for the transaction. Verizon executives continue to say they expect the deal to close before the end of the year.
Commissioner Darcie Houck noted the conditions the CPUC attached to the deal are more robust than those committed by the company at the federal level. Specific measures are directed at ensuring consumers are protected from price increases and service disruptions.
TracFone, a subsidiary of América Móvil, is a prepaid phone provider that sells services through several different brands, including Straight Talk in Walmart stores. Its acquisition by Verizon represents the carrier’s biggest foray into prepaid in its history, immediately adding roughly 20 million prepaid customers to Verizon’s assets.
Most of TracFone’s customers already use Verizon’s network, but because it operates as an MVNO, it has relationships with other carriers as well. Verizon plans to migrate all TracFone customers currently on AT&T and T-Mobile to Verizon’s own network.
At the federal level, one of the big concerns from opponents has to do with the Lifeline program. Consumer advocates pointed to Verizon’s paltry participation in Lifeline while TracFone historically catered to this segment, who qualify for discounts on cell phone service through federal subsidies. Consumer groups dropped their opposition after Verizon made commitments to ensure participation in Lifeline.
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The CPUC’s approval requires that TracFone or Verizon participate in California’s program, dubbed LifeLine, for 20 years after the close of the transaction. (The CPUC refers to the state program as “LifeLine” while the federal program is referred to as Lifeline.)
Here are other conditions the CPUC attached:
- TracFone and Verizon must enroll at least 200,000 California LifeLine subscribers by December 31, 2025. Additionally, by December 31, 2023, at least 15% 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 enrollment in the California LifeLine program.
As for the migration of customers, the CPUC stipulated that Verizon and TracFone must migrate all TracFone customers to Verizon’s network within two years following the close of the acquisition, giving priority to TracFone’s current California LifeLine customers “at risk of having their service compromised.”
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According to the CPUC, their decision establishes a reporting process as well as an enforcement program to ensure compliance with the conditions they ordered, with penalties if specific performance requirements are not met.
“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 Commissioner Clifford Rechtschaffen in a statement.