Verizon CEO Mulling Cable Deal to Counter AT&T Time Warner Merger

Views From The Consumer Electronics Show
Lowell C. McAdam, chairman and chief executive officer of Verizon Communications Inc., walks onto the stage during a keynote address at the 2013 Consumer Electronics Show in Las Vegas, Nevada, U.S., on Tuesday, Jan. 8, 2013. The 2013 CES trade show, which runs until Jan. 11, is the world's largest annual innovation event that offers an array of entrepreneur focused exhibits, events and conference sessions for technology entrepreneurs. Photographer: David Paul Morris/Bloomberg via Getty Images
David Paul Morris/Bloomberg/Getty Images

Verizon CEO Lowell McAdam has been fairly vague about what move his company might make next in the wake of competitor AT&T’s proposed $109 billion mega-merger with Time Warner. But the CEO has been clear that he wasn’t going to follow AT&T into the realm of buying big entertainment conglomerates.

This week, a new clue emerged about a different direction for Verizon. Apparently, McAdam was telling friends at the CES show in Las Vegas that he would like to become an even bigger distributor of content by buying one of the largest cable operators such as Comcast or Charter Communications, the New York Post reported on Tuesday, citing anonymous sources. Altice, the Dutch telecom operator that bought Cablevision Systems last year, is too small to be of interest to Verizon, the paper noted.

No deal is yet on the table or even necessarily likely, the newspaper reported. A spokesman for Verizon (VZ) declined to comment to Fortune.

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The move would fit with scenarios offered by a variety of Wall Street analysts and even John Legere, CEO of hard charging wireless competitor T-Mobile (TMUS), who predicted a possible deal between what he called “two of the most hated brands in America.” And McAdam himself, asked last month about a possible cable combo, mused that a deal with Charter “makes industrial sense.” Although respectful of AT&T’s (T) decision to buy Time Warner (TWX), McAdam said Verizon planned “to skate to where the puck is going.”

Comcast, of course, is not only the nation’s largest cable operator but also owns its own entertainment giant, NBC Universal. That might make it less appealing to McAdam and more complicated to acquire.

A major cable deal would vault Verizon into the top ranks of buyers of entertainment programming, giving it more leverage to negotiate better deals. Currently, the company’s Fios pay TV service has fewer than 5 million subscribers and under 6 million broadband Internet customers. Comcast (CMCSA) has 22 million video customers and 24 million broadband subscribers. Charter (CHTR) has 17 million video subscribers and 21 million for its broadband service.

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A cable deal could also aid Verizon’s efforts to upgrade its wireless network to next generation 5G technology. The new gear operates at higher frequencies such as 28 GHz, which can carry more data and thus allow downloads 20 to 50 times faster than current 4G networks. But the signals also do not travel as far, requiring many more small cellular base stations in neighborhoods. Cable operators’ extensive local infrastructure could be used to connect all those small base stations back to the wired Internet without requiring Verizon to spend a fortune to wire them itself.

Either deal would help draw focus away from Verizon’s drawn out efforts to buy flailing Internet giant Yahoo.

The $4.8 billion Yahoo (YHOO) deal was officially announced in July, after an already drawn out and rumor-filled sales process. But with two major disclosed hack attacks against Yahoo, there’s no sign the deal is close to being completed. Two week ago, Verizon executive Vice President Marni Walden said she was still unsure about whether or not the deal could be closed because Verizon didn’t have all the information it needed to assess the impact of the hack attacks.

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