Will the nation’s No. 1 wireless provider merge with the No. 2 cable provider? Verizon’s interested, and has made a preliminary approach to Charter Communications, The Wall Street Journal reports this morning.
That sent Charter shares up more than 5.0% in morning trading. It has a market value of about $100 billion, following its acquisition last year of Time Warner Cable. Verizon is valued at about $200 billion.
The news comes as Comcast says that it plans to launch its own wireless offering in the first half of this year.
Execs and analysts have speculated about the possibility of a Verizon-Charter combination following the presidential election. Although Donald Trump said during the campaign that he opposed AT&T’s plan to buy Time Warner, and Comcast’s acquisition of NBCUniversal, observers believe that his administration will end up welcoming mega-mergers.
This month Liberty Media’s John Malone, Charter’s dominant shareholder, said that he could envision deals with the three largest cable companies buying T-Mobile, or even a merger of Comcast and Charter, the two largest cable operators.
That’s something “one could contemplate in a Trump administration,” he said in a public forum for Lionsgate.
Verizon also might want some help to compete against AT&T, the No. 1 video distributor following its acquisition last year of DirecTV, and to prepare for the introduction of 5G wireless services.
Thus far Verizon has focused on supporting its wireless offerings with short-form video. It bought AOL and agreed to buy Yahoo — although the fate of the deal is in doubt following the internet company’s disclosure of serious security breaches over the last few years.
But Verizon hasn’t grown enough to impress Wall Street. Its shares are up 1.3% over the last 12 months, far below the overall market which was up about 20% in the same period.
Early this week Verizon confirmed its plan to lay off 155 employees at its Go90 short form video operation.
“A good story is a growth story, and Verizon isn’t growing,” MoffettNathanson Research’s Craig Moffett says.
Many execs believe that content distributors will have to offer consumers a complete portfolio of video, broadband, wired and wireless phone services in order to succeed.
Wireless providers also may need a wired infrastructure to help with their plans to introduce 5G services. They can offer speed of about 1 Gb per second — potentially rivaling what some cable companies offer through their wires.
But data sent over the spectrum used for 5G often can’t travel long distances or through walls and other obstacles. As a result, wireless providers may need to send most transmissions over wires — like the ones in cable systems — up until the so-called last mile where they go to individual users.