Solution Providers Weigh In On Verizon Cable Merger Speculation

Verizon is reportedly considering a large cable purchase to match AT&T's Time Warner acquisition plans in size and scope. But solution providers believe that a mega-merger of this magnitude would make for a nearly unachievable integration of services, and doesn't line up well with Verizon's recent push toward wireless and away from wireline services.

According to reports first published by the New York Post, Verizon CEO Lowell McAdam is "angling toward a cable deal," and that Comcast or Charter Communications were the potential targets. Wall Street analysts have since stated that of the two providers, Comcast would bring more business value to Verizon.

A Verizon/Comcast combination could be a benefit to channel partners in terms of having one provider to go to for infrastructure and services, as well as "one throat to choke," according to one solution provider that partners with both Comcast and Verizon that asked not to be named.

[Related: Solution Providers See AT&T-Time Warner Merger More Likely To Win Trump Administration's Approval If It Creates Jobs]

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Realistically, however, a merger of this size would make integration extremely challenging for both the vendors, partners and end customers, the partner said.

"How do you take two companies of that magnitude and put them together? I see merging operations taking a long time, and that is where we see things go to garbage because no one knows which provider to go to because everything is changing and so is the support behind it," he said.

Comcast is currently valued at $173 billion.

At CES 2017, T-Mobile's outspoken CEO John Legere predicted that Verizon and Comcast would consider a merger in 2017. Legere said that a possible merger between the two companies would form "the ultimate evil corporation of all time," opining that it would make both of their respective services worse for end customers.

"Salvaging '90s dot-coms hasn’t worked out so well for Verizon. And the head start they had on their network is basically gone. Comcast really needs a wireless play. The future looks a little rough for these two megacorps as their legacy businesses erode," Legere said.

Verizon declined CRN's request for comment on the reported cable acquisition plans. However, Verizon CEO Lowell McAdam said that the pairing of Verizon and a cable provider "makes industrial sense" when asked about the possibility of a deal during a meeting with analysts in December.

A cable company purchase by Verizon, however, doesn't match up with the telecom's wireless strategy it has been heavily pursuing in recent years, said Mike Jude, research manager for analyst firm Frost and Sullivan.

Verizon sold off portions of Fios, its fiber-based broadband network, in several states, including California, Texas and Florida, to Frontier Communications last year.

"It's been very clear that Verizon's strategy is leaning toward wireless and business services. They've been backing out of the broadband business," he said. "Cable companies, by and large, have been migrating to fiber-based services, so it doesn't make sense for Verizon to get back involved with fiber since they've been backing out of fiber distribution."

Michael Bremmer, CEO of Moreno Valley, Calif.-based telecom consultancy agreed that it's unlikely that Verizon is pursuing a cable company because of its recent efforts to leave the wireline business, he said.

"It makes no sense," he said. "I also think that it's unlikely the government would approve that even with a Republican [administration]. That's too much Internet within a small of center of power."

President Donald Trump publicly vowed to put a stop to AT&T's plan to acquire media powerhouse Time Warner during his campaign. But because of Trump's recent cabinet appointments and transition team members overseeing the incoming Federal Communications Commission (FCC), industry pundits see fertile ground for mega-mergers and consolidation within the cable and wireless markets.

Some Wall Street analysts have suggested that under the new administration, the coming together of Comcast and Verizon would be viewed in a friendlier light, but a cable deal would only make sense if Verizon could acquire more than the network assets, such as Comcast's NBCUniversal content assets, Frost and Sullivan's Jude said.

"While it would be contrary to where Verizon has been going, we are in an era where everyone in the industry is looking at their hands, wondering what they are going to be dealt next."