Coverage: Is the next big deal Verizon buying Charter?

Verizon Communications is seeking a deal that would merge its telecommunications business with Charter Communications, according to various media reports on Thursday.

Brian Fung of the Washington Post had the news:

A deal between the two could create a massive company controlling access to home broadband, cable TV, and mobile voice and data services, accelerating what some analysts describe as a “mad scramble” of consolidation in the communications industry.

“These companies are chomping at the bit to gobble each other up and control Internet transmission across the country,” said Gene Kimmelman, a former antitrust official at the Justice Department and president of the consumer advocacy group Public Knowledge.

Verizon serves 114 million cellphone subscribers, 4.6 million TV customers and 7 million Internet subscribers; Charter has 17 million TV customers and 21 million Internet subscribers. Together, the two companies’ high-speed Internet businesses would add up to more than Comcast’s 25 million broadband customers; at 21.6 million, their combined base of TV customers would be roughly on par with Comcast’s. Both Verizon and Charter declined to comment.

Aaron Pressman of Fortune reports that a deal between the two would benefit both:

Verizon CEO Lowell McAdam is among those dreaming of a better way—a wireless way—that could deliver the benefits of super high speed fiber optic connections to consumers without the costs and delays. And it’s a dream that is leading him increasingly in the direction of merging with one of the cable giants like Comcast or Charter. After McAdam last month publicly mused about how it would make “industrial sense” to combine with Charter, the Wall Street Journal reported on Thursday that he’s broached the idea of such a deal with Liberty Media CEO Greg Maffei, who also happens to be on Charter’s board. No proposal is yet on the table, and Verizon has considered 10 possible merger partners, Bloomberg added.

The big idea McAdam sees as a possible future is that instead of sending a crew out to run fiber optic cable from utility poles into every house in America, a carrier could just pop a bunch of wireless routers in the mail and have the customers get the whole deal up and running themselves in minutes. Verizon is already running trials of just such a wireless broadband system around the country.

The challenge is that the new wireless technologies being developed, dubbed fifth generation or 5G, rely on using high frequency airwaves that can carry vastly more data than the lower bandwidths in use today. But while 5G signals in the 28 GHz or 39 Ghz range can carry more data, they don’t travel as far or penetrate obstacles or bad weather anywhere near as well as today’s 4G LTE technology in lower bands such as 700 MHz or 1900 MHz.

And that means there will need to be many more wireless cells broadcasting 5G signals and attached back to a carrier’s main network than have been deployed for current 4G mobile networks. Adding more cells raises the question of whether the whole strategy of reducing costs by avoiding wiring homes will be negated by the expense of the new 5G connections.

Anjali Athavaley and Liana B. Baker of Reuters note that no offer has been made:

Speculation over a combination of the companies underscores the pressure the nation’s largest wireless carrier faces to do a deal in the wake of AT&T Inc’s planned $85.4 billion takeover of Time Warner Inc. Verizon and other carriers also face a saturated smartphone market.

Verizon said in July that it struck a deal to buy Yahoo Inc’s core internet properties, but the deal was cast into doubt after Yahoo disclosed data breaches last year.

“I think the market is predictably impatient and wants Verizon to do something yesterday,” said Craig Moffett, an analyst at MoffettNathanson. “The market inevitably draws the comparison to AT&T that, for better or worse, has made its big strategic bet.”

After rising as much as 10 percent and hitting a session high of $341.50 on the news, Charter shares eased and were trading up 6.5 percent at $330.59. Verizon shares were down 1.4 percent at $49.08.

Charter and Verizon declined to comment.