from the bigger-is-always-better dept
But one of the more unlikely rumored M&As that keeps popping up is a Verizon acquisition of Comcast. The idea was floated by UBS analyst John Hodulik in a recent research note to investors, with Hodulik claiming the deal provides incredible "synergies" while propping up Verizon's fifth-generation wireless (5G) ambitions:
"Densification of wireless networks required to meet the needs of video-centric subscribers increases synergies of cable-wireless combinations and provides the springboard for 5G-based services," he proclaims. "A roll-back of Title II re-classification could further increase incentives for cable," he adds, casually citing the likely dismantling of net neutrality and the FCC under Trump.Adding to this speculation this week is a New York Post report claiming that Verizon is looking to acquire either Comcast or Charter:
He put forth a number of models that include Dish fusing with T-Mobile or other variations. But he noted that a Comcast or Charter merger with Verizon would create "significant synergies" and "integrated products" while being "accretive to revenue and EBITDA growth."
"Verizon Chief Executive Lowell McAdam may be getting ready to answer rival AT&T’s moves to buy DirecTV and Time Warner. The New York wireless giant is weighing the acquisition of a cable company to help grow demand for its wireless data products, two well placed sources told The Post. The CEO told friends at the Consumer Electronics Show in Las Vegas earlier this month that he wants to buy into cable, one source said.The problem is the deal doesn't make a whole lot of technical sense given the companies' dramatically different networks. Verizon has no shortage of core network transit capacity to fuel its own 5G ambitions. And while the cable industry's large network of WiFi hotspots could be used to offload 5G wireless users, Verizon has actively been trying to get out of the fixed-line broadband business. The company has largely frozen its FiOS fiber expansion, and has spent the last few years actively trying to drive away DSL customers it doesn't want to upgrade. Verizon's trying (with mixed results) to pivot to media and advertising.
"They need it for 5G,” said a second source, confirming McAdam’s interest. The most likely targets would be “Charter or Comcast,” the source noted."
While Verizon may be interested in NBC, would it saddle itself with tens of millions of new residential broadband customers just as it's trying to back away from the saturated residential broadband market? A more likely effort would involve the "smaller" acquisition of a pure media company like CBS to keep pace with AT&T's $100 billion Time Warner bid and Comcast NBC Universal. Verizon's own streaming service is being called a "dud" by the company's own advertising partners, and owning a richer catalog of original content would go a long way to prop up Verizon's goal of becoming a Millennial advertising juggernaut.
Much of the chatter could simply be Wall Street cashing in on rumor-triggered telecom stock movement. That said, the competitive repercussions of fusing two of the biggest broadband providers and reducing competition further would be monumental. Whether a Verizon Comcast superunion happens or not, it's becoming incredibly clear that Wall Street believes we're entering a new era of rubber stamp regulators, where no deal is too big, and the consumer impact and employment toll of these kinds of megadeals is only a distant, fleeting afterthought.