Verizon’s CEO sees potential synergies from its pending Frontier acquisition
Verizon’s intent to acquire Frontier Communications, a deal that will close later next year, will provide various benefits, including enhancing its fiber footprint and creating revenue synergies.
Speaking to investors during the UBS Global Media and Communications Conference 2024, Hans Vestberg, Verizon's CEO and Chairman, said Frontier’s progress with building fiber made it an attractive asset.
“Frontier has come very far on the fiber,” he said. “They went through bankruptcy, so they could do many things that they couldn’t have done if they were inside Verizon. We are still probably some 12 months away from it. But clearly, it would add to the footprint we have.”
And while Verizon sees an opportunity to improve Frontier’s fiber-to-the-home (FTTH) service after integrating it into its current fold, it could find other ways the assets will align with its current business.
“As we said when we bought it, Frontier has been doing well, but they're still not up to Fios’ performance,” Vestberg said. “We want them to get Fios performance, and many synergies are coming in there. We talked about $500 million. We haven't got the assets yet, but I believe the team will find even more synergies and, more importantly, revenue synergies.”
Fiber expansion ahead
Everyone watching Verizon’s Frontier acquisition will wonder how it will influence the rate at which Verizon expands fiber to more locations.
While it still wants to complete the acquisition first, Verizon has intimated that it will perform over 1 million passings yearly.
Verizon and Frontier have approximately 10 million fiber customers across 31 states and Washington D.C., with fiber networks passing over 25 million premises. Both companies expect to increase their fiber penetration between now and closing.
“We have said we're going to do plus 1 million passings. And some people take that as 1 million,” Vestberg said. “The plus is significant here because we will do it disciplined and have the best return on investment.”
He added, “So we see that opportunity, but we want to close first.”
Verizon wants to acquire Frontier to address 35 million to 40 million households. However, Vestberg emphasized that it must evaluate the markets it is acquiring from Frontier.
“Where I plan it and how we will do it, that's too early to say, knowing exactly where we're going to deploy it because it's very different to deploy in a rural area and suburban area, in an urban area,” he said. “So, there are a lot of factors that need to come in, including where the market is in general.”
Consumer-led broadband, wireless offerings
By expanding its wireline and wireline broadband reach, Verizon is confident it can make a stronger case for converged offerings.
Vestberg said having a nearly ubiquitous broadband footprint is a key foundation for convergence.
“Today, the market is not super high on convergence because no one has a nationwide broadband footprint,” he said. “I think we're going to be as close as possible. We aim to cover over 100 million households with broadband in a few years.”
While having a more prominent broadband footprint better positions Verizon to offer what Vestberg says is a “totally different offering,” Verizon sees the converged opportunity as either demand or consumer-led.
“If the customer wants to buy wireless and broadband from us, we will sell it,” he said. “And there are some values that we can share because they are lower when it comes to the building, customer satisfaction, and all of that, as well as operations.”
He added, “It's not like, hey, if you take my broadband business, I give you wireless” because we want them to be stand-alone.”
The other potential benefit Verizon could realize with converged offerings is customer retention.
“With the growth of the broadband base, we will have more combined customers,” Vestberg said. “That will be important over time because the more services you have, horizontally or vertically, the lower the churn. So, it has merits for us as well, and we're willing to share that, but we want it to be demand-led and consumer-led.”
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Sean Buckley
Sean is responsible for establishing and executing the editorial strategies of Lightwave and Broadband Technology Report across their websites, email newsletters, events, and other information products.