Forget chatter about a T-Mobile-Sprint tie up.
A bigger, better M&A rumor is swirling this week after the New York Post on Tuesday reported Verizon CEO Lowell McAdam may be considering a cable acquisition to counter moves from rival wireless carrier AT&T.
According to the Post’s Claire Atkinson, two separate sources indicated McAdam is toying with the idea, with one reporting they overheard the CEO discussing the matter at CES earlier this month. Among the likely candidates cited by the sources are Charter Communications and Comcast, both of whom have announced plans to set up MVNO wireless service through the carrier.
The former suggestion eerily jives with comments made by TCI hedge fund founder Chris Hohn, who last month floated the idea that “Verizon over time will buy Charter.”
Though McAdam hinted in December a cable merger “makes industrial sense,” Hohn’s assertion was challenged by Recon Analytics’ Roger Entner, who said such an acquisition would represent a 180-degree turnaround in strategy for the carrier giant.
“Tell me why Verizon is selling landline and FiOS properties left and right just to buy a cable company,” Entner challenged. “Verizon has been a seller of wireline, not a buyer. The reason they bought XO (Communications) was because (XO) really didn’t have any customers and they got fiber and spectrum licenses … The key is Verizon’s strategy is getting out of retail fixed and this would get them deeper in than they ever were before.”
The Post’s report, however, indicated Verizon may have had a change of heart in light of recent moves from major rival AT&T, including its pending deal with Time Warner. And its decision to offload FiOS properties could give it a leg up in securing approval for a cable merger, the report indicated.
While Verizon is currently in the midst of acquiring internet and content giant Yahoo, that deal is far from certain given recent hacking revelations and Verizon’s reluctance to reaffirm its commitment to follow through with the merger. Should the company back out of the $4.83 billion deal, it is possible such a move could free up some cash for the carrier to use elsewhere, say in a cable acquisition.
But, as noted by the Post, the prospect of a Verizon-cable tie up is still only an inkling and very far from a sure thing.
