Charter, Verizon Flirt With Merger, Because Who Likes Broadband Competition Anyway?

Broadband

from the look-at-all-the-synergies dept

Back in January, Wall Street chatter started to suggest that with Trump being much more friendly to M&As, some previously-unthinkable mergers were in store for the already uncompetitive telecom market. The most commonly discussed is a new merger between T-Mobile and Sprint (regulators blocked the first attempt in 2014 because it would have dramatically reduced competition). But another major rumor involves Verizon acquiring either Comcast or Charter Communications, something that Verizon executives have publicly tried to downplay, but evidence suggests remains high on the company’s agenda all the same.

In fact, a report last week indicates that Charter has already turned down Verizon’s initial offer. The offer — valued at between $350 and $400 a share and well over $100 billion total — wasn’t quite high enough for Charter’s liking, according to insiders familiar with the proposal:

The offer ? valued at between $350 and $400 a share, and well over $100 billion, according to two of the sources familiar with the move ? was rejected by Charter because it was too low ? and because Charter and its largest shareholder, Liberty Media, weren?t ready to sell…Also standing in the way of Liberty Media agreeing to a deal for any of its units is the tax implications, which would be unpalatable to its billionaire chairman John Malone, sources said.

And part of the reason it’s “unpalatable” right now is that the dust still hasn’t settled from the telecom industry’s last horrible merger, Charter’s $79 billion acquisition of Time Warner Cable and Bright House Networks, approved under the Obama administration. That deal resulted in frozen speed upgrades, significantly higher prices and somehow even worse customer service. The end result has been a tidal wave of complaints about the new Spectrum company from consumers across newspapers nationwide, most of them now realizing that, for consumers, such deal “synergies” are often a step backwards.

Verizon’s no stranger to deal dysfunction either, having recently struggled to finalize its Yahoo acquisition after it was revealed the company had numerous hacking intrusions it failed to tell Verizon about during negotiations. And the company’s sale of its unwanted DSL customers in California, Texas and Florida was an absolute, indisputable shit show as the acquiring company, Frontier Communications, repeatedly highlighted it couldn’t handle the massive influx of unwanted, mostly rural, broadband subscribers. It’s also now drowning in debt, with bankruptcy on the lips of many investors.

So why would Verizon, a company with its own mounting debt, already looking to exit the fixed-line broadband business, suddenly want to acquire a cable company? It’s believed that Verizon’s primarily interested in Charter’s fixed-line transit and other core infrastructure as a way to beef up its fifth-generation (5G) wireless ambitions. Of course like all such deals, there’s the added benefit of eliminating a direct competitor in the television and broadband space, reducing the already skimpy competitive options already available in the consumer broadband market.

Filed Under: broadband, competiton, mergers
Companies: charter, verizon