Verizon's ambition brings risk of illogical buying

Liberty Broadband

26/01/2017 17:53

(The author is a Reuters Breakingviews columnist.  The opinions 
expressed are her own.) 
    By Jennifer Saba 
    NEW YORK, Jan 26 (Reuters Breakingviews) - Verizon 
Communications  VZ.N  may be in the market for a cable guy. The 
$200 billion telecommunications firm is eyeing $84 billion 
Charter Communications  CHTR.O  after taking on smaller AOL and, 
assuming the deal actually happens, bits of Yahoo  YHOO.O . Past 
splashy bets like shelling out $130 billion to buy out 
Vodafone's  VOD.L  stake in their U.S. wireless joint venture 
are showing signs of structural decline. Verizon's search for 
new businesses is looking haphazard. 
    Verizon is working with advisers on a potential transaction, 
according to the Wall Street Journal on Thursday. That suggests 
any plan is still in the early stages and it's unclear if 
Charter, which is nearly one-quarter owned by media mogul John 
Malone's Liberty Broadband  LBRDA.O , would be receptive. 
    Still, Verizon Chief Executive Lowell McAdam extolled the 
merits of a tie-up with Charter just last month. AT&T's  T.N  
nearly $50 billion purchase of DirecTV in 2015 may have 
something to do with it. Verizon's telco rival said on Wednesday 
that it added more than 200,000 paid subscribers to its 
video-streaming service, DirecTV Now, in the first month. 
    Meanwhile, Verizon is revamping Go90, its mobile-streaming 
product for young adults, after struggling to gain traction. The 
company unveiled disappointing earnings on Tuesday, missing 
analysts' estimates for new wireless monthly subscribers. The 
pending $4.8 billion acquisition of Yahoo's advertising and 
search businesses is proving to be more of a headache than 
expected, too, following Yahoo's disclosure of two massive data 
breaches. 
    In one sense, a Verizon-Charter combination would be just 
another turn of the exhausting telecoms-media carousel. After 
all, Time Warner  TWX.N  famously announced a merger with AOL 
back in 2000, only to offload the internet rump in 2009 (Verizon 
bought it in 2015); earlier in 2009, Time Warner spun off Time 
Warner Cable, now owned by Charter; and AT&T's $85 billion deal 
to buy Time Warner is awaiting approval. 
    Perhaps Verizon believes Donald Trump's administration will 
prove a pushover on mergers compared with Barack Obama's. 
Earlier this week, Trump named Ajit Pai to chair the Federal 
Communications Commission, which would have to approve any 
acquisition of a cable company. As a commissioner, Pai was 
against imposing conditions on Charter's purchase of Time Warner 
Cable, for instance. Even if Verizon could buy Charter, however, 
that doesn't mean it should. 
    On Twitter https://twitter.com/jennifersaba 
          
    CONTEXT NEWS  
    - Verizon Communications is considering buying cable company 
Charter Communications, according to a Jan. 26 report in the 
Wall Street Journal, which cited people familiar with the 
matter. 
    - The $200 billion telecommunication firm is working with 
advisers exploring a potential tie-up, though it's unclear 
whether Charter is open to the idea. Verizon has not proposed an 
acquisition to Charter, Reuters reported according to unnamed 
sources. Charter's market value is $84 billion. John Malone's 
Liberty Broadband holds 25.6 percent of Charter's stock, 
according to Charter's proxy. 
    - Verizon is currently weighing its July agreement to buy 
Yahoo's core advertising and search assets for $4.8 billion. Two 
major hacking incidents disclosed last year after Verizon agreed 
to the transaction have put pressure on the deal. 
    - Shares of Charter were up more than 6 percent in morning 
trading on Jan. 26 after the report. 
    - For previous columns by the author, Reuters customers can 
click on  SABA/  
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Verizon exploring deal with cable company Charter - WSJ    
 urn:newsml:reuters.com:*:nL4N1FG45Q 
Wall Street Journal article    http://www.wsj.com/articles/verizon-is-exploring-combination-with-cable-firm-charter-communications-1485439901?mod=djemalertNEWS 
BREAKINGVIEWS- Verizon and AT&T will get best connection from DC 
    urn:newsml:reuters.com:*:nL1N1FE4J8 
BREAKINGVIEWS- Wacky Yahoo rebrand obscures Verizon deal risk    
 urn:newsml:reuters.com:*:nL1N1F016R 
BREAKINGVIEWS-Charter deal OK puts John Malone in game of 
thrones     urn:newsml:reuters.com:*:nL2N17S1DR 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
 (Editing by Richard Beales and Martin Langfield) 
 ((jennifer.saba@thomsonreuters.com;)(Reuters 
Messaging:)(jennifer.saba.thomsonreuters.com@reuters.net)) 
 
Keywords: CHARTER COMMNS M&A/BREAKINGVIEWS