Verizon's Next Move: Relax
Agreeing with what we wrote a couple of days ago, the NYT published an article today explaining the reasons that there is little strategic incentive for Verizon to buy Vodafone’s 45% stake in Verizon Wireless. Verizon has capital and access to debt, but wouldn’t that capital be more strategically deployed if it were invested in fiber deployments, IP backbone integration between wired and wireless, service creation, or acquisition of an smaller independent telco? Why buy that which you already control?
In fact, why do we all automatically respond to one merger with speculation on the next? Perhaps it’s often a logical step, but it shouldn’t be automatic. At some point, it makes sense for carriers to focus more on services, support, and quality over scale. Delivering better services at better prices is another great way to beat the competition. Scale is great for lowering average costs, but at some point, we have to realize that adequate scale has been achieved and further scale increases offer diminishing marginal utility. At that point, merger complexities and friction may actually create net negative economies of scale. At which point does M&A morph from a strategic imperative into nothing more than a vent for machismo?
