Verizon to acquire Frontier in $20 billion deal to boost fiber network

Verizon ( VZ ) said Thursday it will buy Frontier Communications ( FYBR ) in an all-cash deal valued at $20 billion as the U.S. wireless carrier looks to grow its fiber network.

Shares of Frontier Communications fell more than 9 percent in premarket trading. Verizon climbed about 1%.

Verizon offered $38.50 per Frontier share owned, a 37.3 percent premium to Frontier’s closing price on Sept. 3, before reports of a potential acquisition surfaced.

The acquisition, which is expected to close in about 18 months, will help Verizon better compete with AT&T and others by allowing it to offer premium broadband services to both existing and new customers.

Frontier has 2.2 million fiber subscribers in 25 states, which will combine with Verizon’s approximately 7.4 million Fios connections in nine states and Washington, DC

Verizon’s fiber network is mostly in the Northeast and Mid-Atlantic regions, while Frontier’s coverage spans several states in the Mid West, Texas, California, and more.

“The acquisition of Frontier is a strategic fit. It will build on Verizon’s two decades of leadership … and represents an opportunity to become more competitive in more markets across the United States,” Verizon CEO Hans Vestberg said in a statement.

The transaction is expected to generate at least $500 million in annual operating cost synergies and be accretive to Verizon’s revenue and adjusted earnings before interest, taxes, depreciation and amortization at closing.

(Reporting by Deborah Sophia in Bengaluru; Editing by Shilpi Majumdar and Sriraj Kalluvila)