03:30 PM EDT, 09/09/2024 (MT Newswires) -- Verizon Communications' ( VZ ) potential acquisition of Frontier Communications Parent ( FYBR ) is a favorable move for the company's competitive position and growth potential, RBC Capital Markets said in a note emailed Monday.

"We view favorably Verizon's ambitions to pursue fiber assets and improve its competitive position in the convergence play, while executing on operating efficiencies and cross-selling opportunities," RBC said, adding that it doesn't see any additional bidders for Frontier's assets and expects the deal to be approved.

The $20 billion transaction implies Frontier's current structure with $10 billion net debt. Based on street estimates, Frontier is expected to need additional debt of $2 billion between Q2 of 2024 and full-year 2025 to achieve 9.1 million fiber passings, boosting its enterprise value to $21.7 billion, RBC said.

"We expect the deal to be approved but the length of review and conditions attached will depend on the election outcome," RBC added.

Verizon's free cash flow and earnings before interest, taxes, depreciation and amortization growth are expected to exceed standalone levels from year one post-deal, with FCF improvement by 2028, according to the note.

RBC maintained its $42 price target on Verizon's stock, with a sector perform rating.

Price: 42.60, Change: +1.45, Percent Change: +3.52