Verizon CEO Lowell McAdam
Photograph by David Paul Morris —Bloomberg via Getty Images

Does he want a big media merger or doesn't he?

By Aaron Pressman
April 21, 2017

Verizon CEO Lowell McAdam spent much of the past two years explaining why he didn’t need to acquire a big media company as part of his diversification strategy for the telecommunications giant. Then this week, he tore up the old playbook and invited the heads of CBS, NBC, and ABC to give him a call.

Investors and analysts were left a bit stunned and unsure quite how seriously to take McAdam’s new tack. But the idea that Verizon suddenly needed to make a massive acquisition along the lines of AT&T’s $109 billion bet on Time Warner twx did not instill confidence.

Walter Piecyk at BTIG Research summed up the view of many on Wall Street, tweeting a critical quip of famed Harvard Business School professor Michael Porter: “The company without a strategy is willing to try anything.”

The tweet came after McAdam gave two interviews on Tuesday and spoke somewhat confusingly about possible mergers.

Live on CNBC, the CEO rejected suggestions that Verizon should buy Charter Communications chtr or another big cable company. “I think our shareholders expect us to look at every option, but I would tell you right now we haven’t seen the architectural fit,” McAdam said. “And we haven’t seen a willing seller and a willing buyer that have a meeting of the minds.”

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But a few hours later, in a print interview with Bloomberg, McAdam sounded far more interested in dealing. Referring to Brian Roberts, CEO of NBC-owner Comcast cmcsa , McAdam said: “If Brian came knocking on the door, I’d have a discussion with him about it,” Bloomberg reported. And McAdam appeared to volunteer that he would also take a call from Bob Iger, CEO of Disney dis which owns ABC, and CBS cbs boss Les Moonves.

That’s quite different from what the Verizon vz CEO was saying even just a few months ago, when he was touting his small deals for the likes of AOL and Yahoo. At a UBS investor conference, McAdam rejected the need to follow AT&T’s t lead into big media. “We want to skate to where the puck is going,” he said. “We are more bullish on digital media, because the millennials don’t want a 300-channel bundle.”

A year earlier, at a Goldman Sachs conference, he was even more direct. “I don’t see us going out and buying network TV and that sort of thing,” he said. “The digital media, which is the direction that we are heading with mobile-first, are much more smaller companies and wouldn’t frankly register in a big way for investors when we purchased them.”

Pressure to deal

With the company’s results suffering and the strategic view in flux, Verizon’s shares have lost 12% so far this year, including 3% this week amid the M&A confusion. At this point, the stock’s nearly 5% dividend yield, the highest in the Dow Jones Industrial Average index, is probably the most powerful force precluding a much deeper crash.

McAdam’s challenge is that Verizon’s wireless business, its profit engine of the past decade, is slowing faster than anyone anticipated. In a fiercely competitive market, Verizon lost a record 289,000 regular monthly phone customers in the first quarter and wireless revenue fell 5%. At the same time, new growth businesses like digital advertising and smart, connected devices remain tiny relative to the wireless unit and won’t be material to the bottom line for at least a few more years.

“Verizon has become something close to a pure play wireless operator, and the wireless business is not a happy place,” analyst Craig Moffett of MoffettNathanson wrote on Thursday. “So it isn’t hard to imagine that the pressure on Verizon to do a deal–any deal–is very real.”

But as Moffett and other analysts also observed, buying a big media company would be expensive, complicated, and unlikely to solve Verizon’s long-term challenges. Which leaves the CEO’s about-face even more puzzling.

It’s possible that McAdam’s comments to Bloomberg were a slip of the tongue or perhaps taken out of context, as Verizon CFO Matt Ellis tried to suggest on Thursday’s call with analysts. But there was an awful lot of specificity for a misstatement and the CEO didn’t do any further interviews to clarify the matter.

So for now, confusion will reign.

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