Verizon to buy prepaid phone seller Tracfone

Verizon, the country’s largest phone company, is buying prepaid phone seller Tracfone for up to $6.9 billion, expanding its low-income customer business.

Tracfone, a subsidiary of Mexico telecom giant America Movil, is a mobile reseller, the largest in the U.S. It doesn’t build its own network, instead paying companies like Verizon, AT&T and T-Mobile a fee to use theirs.

Most U.S. cell phone customers are “postpaid” rather than prepaid — they pay a monthly phone bill. Prepaid customers are more likely to be low-income or have bad credit. Tracfone is a major provider of the U.S. Lifeline service, which discounts phone and internet service for low-income customers. Verizon said Monday that it would continue to offer Lifeline through Tracfone.

The deal consists of $3.1 billion in cash, $3.1 billion in stock and up to $650 million more in cash for America Movil based on the Tracfone business hitting certain performance targets after the sale.

Verizon said it expects the deal to close in 2021.