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Verizon (VZ) Gets FCC Nod for TracFone Deal, Boosts Portfolio

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Verizon Communications Inc. VZ has secured approval from the FCC for the acquisition of TracFone Wireless, Inc., paving the way for the likely closure of the deal inked in September 2020 by this week. The buyout of this subsidiary of Mexico’s largest telecommunications firm, América Móvil, S.A.B. de C.V. AMX, is expected to offer enhanced access to Verizon’s wireless network and a suite of mobility products and services to its huge customer base.

America Movil aims to reap more benefits from its tower assets and divesture of non-core assets to boost shareholders’ value and reduce debt. The company leveraged the investments it made over the past years in new technologies that enhanced the capacity and reach of its platforms, enabling it to handle significant traffic increases with no detriment to quality or speed. With an increase in subscriber base, America Movil has strengthened its position in core markets. It is one of the leading providers of integrated telecommunications services in Latin America and the Caribbean.

Headquartered in Miami, FL, TracFone is the largest reseller of wireless services in the United States. It serves almost 21 million subscribers across a network of more than 90,000 retail locations. As a long-time partner of Verizon, more than 13 million TracFone’s customers depend on Verizon’s wireless network under a wholesale agreement.

Following the merger, Verizon plans to bring its 4G LTE, 5G networks and other innovative technologies to TracFone’s customers. The transaction aligns with Verizon’s growth-oriented Network as a Service strategy and more U.S. consumers will have access to its wireless plans with better experiences.

The company had earlier gained approvals from the U.S. Justice Department and the California Public Utilities Commission for the deal. The FCC consent was based on the condition that Verizon will protect low-income consumers from price increases and continue to participate in Lifeline – a telecommunications subsidy program for low-income households. TracFone has been one of the largest providers in the Lifeline program, with about 1.7 million low-income subscribers in 43 states and the District of Columbia.

With one of the most efficient wireless networks in the United States, Verizon deploys the latest 4G LTE Advanced technologies to deliver faster peak data speeds and capacity for customers, driven by customer-focused planning, disciplined engineering and constant strategic investment. Verizon has been aggressively forging ahead to expand its fiber optics networks to support 4G LTE and 5G wireless standards as well as wireline connections. The company remains focused on making necessary capital expenditures due to the expansion of 5G mmWave in new and existing markets, the densification of the 4G LTE wireless network to cater to huge traffic demands across multiple verticals and the continued deployment of the fiber infrastructure. In addition, Verizon is deploying the C-Band 5G network across the country to capitalize on the mid-band spectrum.

Verizon’s 5G mobility service offers an unparalleled experience that impacts industries as diverse as public safety, health care, retail and sports. The company’s 5G network hinges on three fundamental drivers to deliver the full potential of next-generation wireless technology. These are massive spectrum holdings, particularly in the millimeter-wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy a large number of small cells.

The stock has lost 15% over the past year compared with the industry’s decline of 14.5%. Nevertheless, we remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock.

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Zacks Investment Research

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A better-ranked stock in the broader industry is Clearfield, Inc. CLFD, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Clearfield delivered an earnings surprise of 50.8%, on average, in the trailing four quarters. Earnings estimates for the current year for the stock have moved up 19.4% in the past 60 days. Over the past year, Clearfield has gained a stellar 183.8%.

Qualcomm Incorporated QCOM, carrying a Zacks Rank #2, is another solid pick for investors. It has a long-term earnings growth expectation of 15.3% and delivered an earnings surprise of 11.2%, on average, in the trailing four quarters.

Earnings estimates for the current year for the stock have moved up 15% in the past 90 days. Qualcomm is likely to benefit in the long run from solid 5G traction and a surge in demand for essential products that are the building blocks for digital transformation in the cloud economy.


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Clearfield, Inc. (CLFD) : Free Stock Analysis Report

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