Verizon Is Reportedly Courting Cable Players; Partners Weigh-In
Verizon is considering a large cable purchase to match AT&T's Time Warner acquisition plans, according to multiple reports citing sources close to the matter.
Verizon CEO Lowell McAdam is "angling toward a cable deal," and Comcast or Charter Communications are potential targets, according to a report first published by the New York Post earlier this month. On Thursday, The Washington Post reported that Verizon is looking into a combination with Charter, and that McAdam has made a "preliminary approach" to officials close to Charter, according to unnamed sources.
Verizon declined CRN's request for comment on the reported cable acquisition plans. However, McAdam said that the pairing of Verizon and a cable provider "makes industrial sense" when asked about the possibility of a deal during a meeting with analysts in December.
A Verizon-Charter combination would unite more than 114 million wireless subscribers from Verizon, as well as its remaining landline business, and Charter’s cable network which services 17 million TV customers and 21 million broadband connections. Buying Stamford, Conn.-based Charter would give Verizon a dense fiber and cable network it could use to support its 5G wireless services.
Charter is valued at about $85 billion, and reports suggesting that Verizon was considering a buyout sent Charter's shares soaring by 9 percent on Thursday morning. Verizon is valued at $194 billion with more than $100 billion in debt. Comcast is currently valued at $173 billion.
One West Coast agent that partners with Verizon, Comcast, and Charter Communications said it hasn't heard anything concrete from any of the carriers concerning any merger or acquisition plans. An agent executive that asked not to be named said his company "isn't worried" about the potential channel if Verizon were to acquire one of the two cable providers.
All three providers, the partner said, are "very channel-friendly," he said, adding that he doesn't believe that outlook would change as the result of a merger.
Earlier this month, Wall Street analysts stated that of the two providers, Comcast would bring more business value to Verizon. A Verizon/Comcast combination could be a benefit to channel partners by creating one provider to go to for infrastructure and services, as well as "one throat to choke," according to one East Coast-based solution provider that partners with both Comcast and Verizon and asked not to be named.
At CES 2017 earlier this month, T-Mobile's outspoken CEO John Legere predicted that Verizon and Comcast would consider a merger in 2017. Legere said that a possible merger between the two companies would form "the ultimate evil corporation of all time," opining that it would make both of their respective services worse for end customers.
"Salvaging 90s dot-coms hasn’t worked out so well for Verizon. And the head start they had on their network is basically gone. Comcast really needs a wireless play. The future looks a little rough for these two megacorps as their legacy businesses erode," Legere said.
A merger between Verizon and either of the two cable companies could face some of the same regulatory scrutinies as the proposed AT&T Time Warner acquisition. While President Donald Trump publically vowed to put a stop to AT&T's plan while campaigning, he has since appointed a former Verizon lawyer to head the FCC.
JP Morgan telecom analyst Philip Cusick told investors, in a research note on Thursday, that a Verizon-Charter combination is "feasible but difficult on the financials," while Comcast's size and NBC ownership would most likely render any deal with Verizon a "non-starter" because it would make for a difficult regulatory review process with antitrust obstacles.