Verizon falls after announcing the acquisition of Frontier for $20 billion

• Verizon agrees to pay $20 billion in cash for Frontier Communications.
• Frontier is the largest pure-fiber telecommunications company in the U.S., and the deal will expand Fios’ offering to 25 more states.
• VZ shares fell more than 3% on Wednesday and continue to trade lower on Thursday.
• The Dow Jones is trading nearly a percentage point lower on Thursday, underperforming the S&P 500 and NASDAQ.

Verizon (VZ) Shareholders have not welcomed the announcement that the telecommunications company will acquire Frontier Communications (FYBR).

VZ shares fell 3.4% on Wednesday when the rumors surfaced and are down another 0.4% as of writing Thursday.

Meanwhile, Frontier shares rose nearly 38% on Wednesday before plunging 9.5% on Thursday when the final figure of $20 billion fell short of its initial expectations.

He Dow Jones Industrial Average (DJIA)of which Verizon is a member, fell 0.9% in morning trading. That performance is worse than that of the S&P 500 and the NASDAQ, though both are also somewhat lower. Again, the Dow has been weak all week.

Verizon Stock News

Verizon will acquire Frontier for $38.50 per share in an all-cash deal that values ​​the company at $20 billion.

Verizon says it will gain 2.2 million Frontier subscribers through the latter’s advanced fiber offerings in 25 states. Verizon, which largely provides home and business internet services in the region spanning from Virginia to New York state and Massachusetts, will expand its Fios offering in the Midwest, South and West Coast in locations spanning a total of 31 states and Washington, D.C.

In a statement, Verizon said that closing the acquisition would be immediately “accretive to revenue and adjusted EBITDA growth,” but that by year three it would represent $500 million in annual cost synergies.

Frontier Communications Fiber Offerings (Blue) Expand to 25 Additional States (Verizon Press Release)

Frontier is the largest “pure fiber internet provider,” according to Verizon, which said it will integrate Frontier’s 7.2 million fiber locations into its own network, as well as expand its current offerings by an additional 2.8 million fiber locations by the end of 2026.

“The acquisition of Frontier is a strategic fit,” said CEO and President Hans Vestberg. “It will build on Verizon’s two decades of leadership at the forefront of fiber and is an opportunity to become more competitive in more markets across the U.S., enhancing our ability to deliver premium offerings to millions more customers over a combined fiber network.”

Verizon management also reaffirmed full-year 2024 guidance for adjusted earnings per share (EPS) of $4.50 to $4.70 and wireless revenue growth of 2% to 3.5%.

Verizon Stock Forecast

Verizon stock is still up 9% year-to-date despite this week’s pullback. VZ stock was retesting overhead resistance at $43.00 just before the takeover rumors surfaced on Wednesday.

VZ stock has been consolidating within a tight rectangle with $43.00 as resistance and $38.75 as support since the start of the year. Verizon stock price has recovered in late 2023 after hitting a 13-year low just above $30.00 in October last year.

Verizon found support on Thursday at the blue 50-day simple moving average (SMA) and is now recovering towards the 20-day SMA. The best bet is that the current nervousness will subside in the coming weeks. At that point, the bulls will once again attempt to reach $43.00.

VZ stock daily chart