According to a report in the Wall Street Journal, Verizon is considering a takeover of Charter, which itself recently completely a takeover of Time Warner Cable. Merging the two companies would create a real telecoms giant: Verizon has over 100 million wireless customers, and Charter is now the second-largest broadband company in the country.
“Verizon CEO Lowell McAdam has made a preliminary approach to officials close to Charter and Verizon is working with advisers to study a potential transaction,” the report claimed, citing anonymous sources. A deal is not necessarily on the table at this point, but Charter shares are up by more than 7% following the news.
Merging the two companies would give the new Verizon/Charter behemoth the ability to sell “triple-play” bundling, the lucrative contracts where customers are getting wireless, broadband and cable from the same company. With the cable TV business under fire from cord-cutters and Verizon’s margins getting squeezed by T-Mobile, service bundling could potentially give both giants a new way of making money for the next few years.
Then, you have the standard monopolistic advantages of merging two internet providers. Verizon still provides broadband to millions of customers, as does Charter. Internet in the US is already a monopoly in wide swathes of the country. A Verizon-Charter merger would give the combined company about 26 million broadband subscribers, which is a little more than a quarter of the entire country.
In previous years, the biggest obstacle to such a deal would have been the FCC and Justice Department, which under Presidetn Obama took a dim view of mergers that concentrated power so heavily. President Trump’s administration, including newly-appointed FCC Chairman Ajit Pai, is expected to be more business friendly, but we have yet to see any new policies or rulings that would go either way.
Update Reuters has published an article citing its own anonymous sources, saying that Verizon “has not proposed an acquisition to Charter Communications Inc.” The report gives no further details; reading between the lines, it might be that Verizon and Charter are still in highly preliminary conversations, or are discussing some kind of strategic partnership that does not include a wholesale merger.