Verizon's CEO Is Open to Deal Talks, From Comcast to Disney

By Bloomberg

(Bloomberg) — Verizon Communications Inc. is considering merger possibilities to reset the course of the company given the fast-changing structure of the industry, and would be open to talks with Comcast Corp., Walt Disney Co. or CBS Corp., said Chief Executive Officer Lowell McAdam.

Verizon, the largest U.S. wireless carrier, is seeking new sources of growth as the mobile-phone business matures and its new media ventures take time to gain traction. As the company upgrades its infrastructure to provide fifth-generation, or 5G, services, Comcast’s fiber assets in particular would help handle the surge in capacity demands. And McAdam would entertain deal talks with Comcast CEO Brian Roberts to achieve those goals, he said in an interview Tuesday at Bloomberg’s New York headquarters.

“If Brian came knocking on the door, I’d have a discussion with him about it,” McAdam said. “But I’d also tell you there isn’t much that I wouldn’t have a discussion around if somebody came and said ‘Here’s a compelling reason why we ought to put the businesses together.’”

Among cable giants, Comcast has the best fiber assets, in addition to a compelling media business with NBCUniversal. Still, McAdam said he would take that same call from Disney’s Bob Iger or CBS’s Les Moonves.

Shares of all three potential merger companions rose on McAdam’s comments Tuesday. Comcast climbed 1.1 percent, CBS rose 1.8 percent and Disney advanced 0.4 percent. Representatives for Comcast and CBS declined to comment. A representative for Disney didn’t immediately return calls seeking comment.

A combination between Verizon and any of the three companies would dramatically reshape the media and telecommunications industry, following AT&T Inc.’s $85.4 billion proposed acquisition of Time Warner Inc. — a deal that would make the phone carrier one of the biggest producers of TV shows and movies in the world. 

A major media deal would also be a departure for New York-based Verizon, whose acquisition strategy has so far contrasted with that of arch-nemesis AT&T. While the Dallas-based phone carrier snapped up satellite provider DirecTV and agreed to buy Time Warner in transactions valued in the tens of billions of dollars, Verizon has spurned old media and kept its purchases below $5 billion.

In the last two years, McAdam’s company has done deals for advertising technology and web traffic, acquiring AOL Inc. and the internet assets of Yahoo! Inc. Those are a far cry from McAdam’s most famous deal, the $130 billion acquisition of Vodafone Group Plc’s stake in Verizon Wireless in 2014.

Verizon’s most prominent entertainment investment so far has been go90, a YouTube-like video streaming service targeted at teens and preteens. The service hasn’t been a huge hit, so other media platforms that get more viewers could be attractive for Verizon.

“Randall buying into content has made people reevaluate their portfolio,” McAdam said of AT&T CEO Randall Stephenson. “We’re still very excited about Yahoo, bringing them into the fold with AOL. We’re building a lot of millennial-focused content. There are a lot of options out there.”

Verizon has looked to these smaller digital acquisitions to remake itself as the wireless price wars rage on. The carrier, which counts on the mobile-phone business for 75 percent of its sales, has struggled to find a balance between preserving profits and wooing subscribers with promos, freebies and price-cuts. In February, the company started offering unlimited data services for the first time, in part a capitulation to rivals who have stolen away their customers with similar offerings.

Shares of Verizon have fallen 4.9 percent in the past year through Tuesday, while CBS has surged 26 percent, Comcast 20 percent and Disney 13 percent.

Trump Effect

Almost everything is on the table for the nation’s cable, telecommunications and media CEOs. With Donald Trump in the White House, executives have been dreaming up big strategies, crossing industry lines and proposing once-unthinkable takeovers. Verizon has already been linked to a merger with Charter Communications Inc. Earlier this year, a person familiar with the matter said Verizon was studying more than 10 options, including large media companies, fiber-optic services providers and network and cable operators, including Charter.

Despite more favorable regulatory conditions, there’s no certainty a megadeal will get done. Cable, phone and media companies operate differently, with different management styles, and often have incompatible assets.

“Given what I know about architecture, financial requirement, cultural fit, there’s never a dream deal,” McAdam said.

For now, Verizon is focused on building a fiber-rich 5G network and developing a business that will place the company in direct competition with ad giants Google and Facebook.

“You can always have a wish list, but the practicalities of it limit your wish list,” McAdam said of deals. “My wish list right now? If I can find a company that had the fiber built for this architecture I’d scoop them up in a minute, but they don’t exist.”