Rumor mill: Verizon pondering purchase of Comcast or Charter

Verizon store front (Monica Alleven)
Rumors of a cable-telecom merger go back a few years, to Verizon offloading FiOS assets to Frontier Communications, but are heating up again ahead of a Trump administration.

Verizon CEO Lowell McAdam is seriously considering buying one of the two biggest cable companies in order to support his wireless giant’s 5G buildout, the New York Post said, citing its usual collection of unnamed sources.

According to the paper, McAdam told friends at the Consumer Electronics Show in Las Vegas two weeks ago that he wants a cable company. 

“They need it for 5G,” a second source told the Post. 

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Amid the backdrop of a Trump administration that would figuratively approve previously unimaginable mergers, the idea of Verizon buying either Comcast or Charter Communications got put in the ear of the telecom industry back in November, when UBS analyst John Hodulik first seeded the concept in an investor note

“We have long believed that secular changes in technology and usage would lead to the convergence of the cable and wireless industries,” Hodulik said. “The transformation of the internet into a mobile-first platform combined with the rapid migration of video from proprietary networks to digital and the rise in competitive pressure this entails increases the value of an integrated fixed and wireless service to cable providers. Densification of wireless networks required to meet the needs of video-centric subscribers increases synergies of cable-wireless combinations and provides the springboard for 5G-based services. A roll-back of Title II re-classification could further increase incentives for cable.”

The speculation picked up steam when McAdam, speaking at a J.P. Morgan investor event in mid-December, said the purchase of Charter by Verizon makes “industrial sense."

Actually, the cable rumors go back a ways, to Verizon offloading FiOS assets to Frontier Communications, which some analysts believed was a strategic attempt to clear a path for the acquisition of cable distribution assets.

Notably, one of the Post’s sources limited the speculation to Comcast and Charter, pointing out that Altice USA’s footprint is too small to help Verizon.