The partnership would combine Verizon's more-than-114 million wireless subscribers with Charter's cable network, which now services 16-million customers, and its 21-million broadband users. Mid-day trading had Charter's stock 6.3% higher to $329.96 and Verizon down 1.5% to $49.05. "It is nearly paradoxical that after years of shedding wireline assets, the company would do an about-face and acquire roughly 17 million residential video subs and 21 million wired broadband subs, and a footprint that covers nearly 50 million homes", Jefferies analyst Mike McCormack opined in a note to clients. Asked about the potential for such a deal, McAdam replied that such a combination "makes industrial sense", according to BTIG analyst Walt Piecyk. Internet in the United States is already a monopoly in wide swathes of the country.
Verizon Communications (NYSE:VZ) last released its quarterly earnings data on Tuesday, January 24th.
In previous years, the biggest obstacle to such a deal would have been the FCC and Justice Department, which under Presidetn Obama took a dim view of mergers that concentrated power so heavily.
Research firm, JP Morgan, had already said that it expects more mergers in the new administration, which is seen as providing a friendly environment. Charter Communications, the country's second-largest cable company after Comcast, could merge with Verizon, the Wall Street Journal reported on Thursday.
Moffett, principal and senior analyst at MoffettNathanson and a long-time cable watcher, wrote in a blog posting that while he doesn't doubt the logic of a Verizon-Charter pairing, he said justifying a deal of the size is tough. Verizon had less than $3 billion of cash on its books as of the end of previous year, but would need far more than that to buy Charter, whose value in the stock market is around $103 billion now. Last year, it merged with Time Warner Cable, giving it control of 34 percent of the USA cable-broadband market, according to Business Insider. It is now one of the largest U.S. providers of internet and cable TV. In the wake of a failed $45 billion merger attempt by Comcast, Charter paid $55 billion in exchange for Time Warner's millions of customers.
Verizon's traditional wireless business has been losing customers to smaller rivals T-Mobile U.S. Inc and Sprint Corp and the company has been looking to diversify its revenue stream. "Comcast's cable business is growing at 8% per year, while Verizon's and AT&T's wireless businesses are both shrinking". Five analysts have rated the stock with a hold rating, sixteen have given a buy rating and two have assigned a strong buy rating to the company. And it overall debt leverage, now at about 3.2 times cash flow (Charters is at 4.3 times), could determine how much cash is part of the deal. That deal has been held up by disclosures of two major security breaches at Yahoo.