On Thursday, September 5th, Eastern Time, the American telecommunications giant Verizon announced that it will spend $20 billion in cash to acquire the fiber-optic network provider. The purpose is to expand its user base, and the transaction is expected to be completed within 18 months. With this acquisition, Verizon can better compete with its rivals AT&T and T-Mobile, especially as they both increase their unlimited data plans and bundled services. $Verizon (VZ.US)$ Verizon, the American telecommunications giant, announced that it will acquire a fiber-optic network provider for $20 billion in cash. The goal is to expand its user base, and the deal is expected to be completed within 18 months. This acquisition will allow Verizon to better compete with rivals AT&T and T-Mobile, especially as they both increase their unlimited data plans and bundled services. $Frontier Communications (FYBR.US)$ Verizon, the American telecommunications giant, announced that it will acquire a fiber-optic network provider for $20 billion in cash. The purpose is to expand its user base, and the transaction is expected to be completed within 18 months. This acquisition will enable Verizon to better compete with its rivals AT&T and T-Mobile, especially considering their increased focus on unlimited data plans and bundled services.

Verizon's offer to acquire Frontier is $38.50 per share, which is 37.3% higher than the closing price on September 3rd. September 3rd was the day before the news of the acquisition was first reported. Frontier is currently heavily indebted, with total debt of up to $11.25 billion as of June 30th of this year. Verizon plans to restructure this debt after the transaction is completed.

Frontier has 2.2 million fiber optic users in 25 states across the United States, while Verizon has approximately 7.4 million fiber optic users in 9 states and the District of Columbia. This merger will bring the total number of fiber optic network coverage locations for both companies to 25 million, while AT&T's corresponding number is 28 million.

Stimulated by the news of the acquisition, Frontier's stock price surged nearly 38% on Wednesday, while Verizon's stock price dropped about 4% at one point. As of the time of writing, Frontier's current trading price is around $35.00, slightly lower than Verizon's acquisition quote.

Verizon CEO Hans Vestberg said that the acquisition of Frontier will bring strategic alignment to the company and help improve its competitiveness in more markets. Through this acquisition, Verizon will not only expand its user base, but also leverage Frontier's market coverage in key states such as the Midwest, Texas, and California to further expand its fiber optic network, which was originally concentrated in the Northeast and Mid-Atlantic regions of the United States.

The two companies have previously engaged in acquisition transactions. As early as 2016, Verizon sold its television and internet business in California, Texas, and Florida to Frontier for $10.54 billion, which also included a portion of fiber optic network and users.

Analysts believe that this acquisition is of limited help to Verizon. According to MoffettNathanson analyst Craig Moffett, Verizon's fiber network covers less than 10% of the United States, and this acquisition will only increase its coverage by about 3%. In comparison, AT&T's fiber network covers less than 15%. Moffett described the impact of this acquisition as changing from "small" to "slightly bigger small," but for fiber business, Verizon still has a long way to go to achieve large-scale coverage through fiber networks.

Editor/Somer