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July 26, 2017
**Editor’s Note: Please click here for a recap of the biggest channel-impacting merger and acquisition news from May and June.**
Citi analyst Jason Bazinet wrote in a research note Wednesday that Comcast should buy Verizon in an acquisition that could be worth $215 billion. That would put the price at a 20 percent premium over Verizon’s market value of $179 billion as of close of market Tuesday.
Frost & Sullivan’s Michael Jude
However, Michael Jude, Stratecast/Frost & Sullivan’s consumer communications services research manager, tells Channel Partners that while a deal like this is possible, it is improbable.
“It would represent a significant concentration of carrier capacity and market control, and the regulators would probably have a very hard time with it,” he said. “Additionally, Verizon and Comcast have very different business focuses: one wireless and the other content distribution. Although they both are pursuing content creation, that is not a large part of either business yet and would likely not serve as a sufficient foundation for a merger.”
Bazinet listed numerous reasons Comcast should purchase Verizon. Verizon’s wireless capabilities would allow Comcast to extend internet connectivity beyond the home, he said. Also, Verizon would be the second-biggest beneficiary of wireless consolidation, following a potential Sprint/T-Mobile pairing, he said.
In addition, a “reduction in the corporate tax rate is not yet reflected in Verizon’s multiple, suggesting potential upside to Comcast if the tax code changes,” he said.
“It’s a call Comcast should make … and Verizon should take,” Bazinet said in the note. The current regulatory climate might be more sympathetic under the current administration to large combinations, he said.
Neither Comcast nor Verizon would comment on Bazinet’s note.
Jude said Comcast would be the biggest beneficiary of the deal.
“They have always been chasing wireless and have cobbled together various wireless schemes over the years,” he said. “Because they already have service deals with Verizon, they would be able to build on existing service agreements to offer more complete service packages (to) their customers. Not incidentally, it would give Comcast a national footprint.”
Jude said the acquisition would further concentrate power in the market and would leave only two major players in the consumer space: AT&T and Comcast.
“This is why the regulators would likely not approve of a straight merger,” he said.
Last month, it was reported that Sprint was in talks with Charter Communications and Comcast about a partnership to augment the cable companies’ wireless offerings. Sprint, controlled by Japan’s SoftBank Group, entered into a two-month period of exclusive negotiations with Charter and Comcast. The move reportedly delayed continued merger talks between Sprint and T-Mobile until the end of next month.
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