Tue, May 12, 3:44 PM
- After earnings last week, AOL CEO Tim Armstrong pointed out how programmatic ads were key to the company's growth -- and now they're the key to its $4.4B acquisition by a video-focused Verizon (NYSE:VZ).
- For Verizon, the timing and focus will be on an upcoming video service that is likely to focus on shorter clips rather than long shows (in keeping with their stated target of mobile-viewing millennials) and would combine key assets in the OnCue service it bought from Intel and the ad-insertion tech that AOL provides. The benefit would come in faster, better ad sales. AOL's Platforms unit grew revenues 21% to $279.8M.
- Wells Fargo's Jennifer Fritzsche points out the difference between Verizon's strategy and that of AT&T: "While T believes there is a greater need to own more physical infrastructure (through DTV), VZ is building up more assets to strengthen its 'mobile first' OTT initiative -– with advertising playing a key role."
- Verizon's approach to video is cheaper, too, notes Andrew Dowell in comparing a 4.4B AOL deal with a $49B DirecTV deal: "Verizon is going after millennials. AT&T has its eye on their parents."
- Meanwhile, Macquarie has downgraded Verizon to Underperform, from Neutral, with a new price target of $45. Shares today are trading down 0.4% to $49.61; AOL is up 18.5% to $50.47.
Tue, May 12, 7:08 AM
- The $50 per share deal will take the form of a tender offer followed by a merger, with AOL becoming a wholly-owned subsidiary of Verizon (NYSE:VZ). AOL chief Tim Armstrong will continue to lead the company after the deal closes.
- "Verizon's acquisition further drives its LTE wireless video and OTT (over-the-top video) strategy. The agreement will also support and connect to Verizon's IoT (Internet of Things) platforms, creating a growth platform from wireless to IoT for consumers and businesses," says the company.
- Closing is expected this summer.
- Source: Press Release
- AOL +18% premarket to $50.25, VZ -0.95%
Thu, Apr. 2, 4:26 PM
- Over-the-top video services seems to have accelerating momentum as more unbundling happens every week, but high-yield pay-TV companies have little to worry about just yet, Moody's says in a new report.
- Customer inertia along with the limited competition they now face should buy providers time to adjust.
- "Evolutionary, not revolutionary" is how the firm describes the pay-TV shift, saying that OTT providers, including Sony and Apple, will take a small number of subscribers for now -- even though consumer perception seems to favor OTT options.
- The firm notes rising bills could force defections, but "the average customer may not realize how much content traditional pay TV service provides, from video on demand and across multiple devices."
- Pay TV stocks today: (CMCSA +1.5%), (TWC +1.9%), (CVC +0.9%), (CHTR -0.6%), (T +0.7%), (VZ +1.1%)
Wed, Mar. 11, 12:51 PM
- DreamWorks Animation (NASDAQ:DWA) is up 2.3% as Verizon (NYSE:VZ) seals a deal to add 200 hours of original video content to its upcoming video service from DWA's AwesomenessTV and DreamWorksTV, targeting teens and young millennials with over-the-top video.
- The programming will include scripted and unscripted series as well as DreamWorks original characters.
- AwesomenessTV, acquired by DreamWorks in 2013, features 7B views and 112M subscribers.
- The deal will take some pressure off what some, like BTIG's Richard Greenfield, see as a heavy dependence on Netflix.
Thu, Feb. 19, 9:02 PM
- T-Mobile (NYSE:TMUS) gained 2.7% today (and another 0.5% in late trading) following its strong Q4 report this morning.
- In the company's call today, CEO John Legere stretched like Armstrong to make a technical point that TMUS is actually the third-biggest U.S. carrier: He says most carriers stop counting "dead" MVNO accounts after 60-90 days, while Sprint (NYSE:S) waits six months. So Legere says Sprint is overcounting by 1.7M customers and is actually behind T-Mobile.
- CFO Braxton Carter tells the Financial Times that the company's guidance (on the low side of expectations) is "conservative" and expectations are high: "We are still taking major flow from the duopoly (T, VZ) ... We are very pleased with our first-quarter momentum."
- T-Mobile should take a Q1 hit in front-loading customer acquisition, but it expects free cash flow to turn positive at some point this year.
- Aside from record customer growth (fueled in part by aggressive promotion), the company pointed to highly watched synergies with its MetroPCS brand -- projecting to reach full run-rate synergies of at least $1.5B by 2016. Net present value there is expected to be $9B-10B, up from original $6B-7B projection.
- That's finally "kicking in," says Craig Moffett: "Synergies from the PCS deal, a key driver of our bull case, are coming in sooner and higher than expected" and that the firm "has at last turned the profitability corner."
- Related: T-Mobile US (TMUS) Q4 2014 Results - Earnings Call Transcript (Feb. 19 2015)
Thu, Feb. 5, 4:35 PM
- Moving swiftly yet again, Verizon (NYSE:VZ) confirms its plan to sell wireline assets in California, Florida and Texas to Frontier Communications (NASDAQ:FTR) for $10B ($9.9B cash and some $600M in assumed debt). It would be Frontier's biggest-ever deal.
- Frontier shares up heavily after hours, +9.7%.
- Verizon will also buy back up to $5B in stock.
- Combined with a just-announced sale of cell towers to American Tower, Verizon should see the near-$15B intake expected, a vital step as the company must pay the FCC $10B this month to cover its bids in the AWS-3 spectrum auction.
- Previously: WSJ: Frontier close to $10B buy of Verizon's wireline assets (Feb. 04 2015)
- Previously: Verizon reaches $5B sale of towers to American Tower (Feb. 05 2015)
- Previously: FCC releases winners in record spectrum auction (Jan. 30 2015)
Wed, Feb. 4, 5:19 PM
- Frontier Communications (NASDAQ:FTR) is reportedly close to a $10B deal to buy the wireline assets that Verizon (NYSE:VZ) put up for sale in the aftermath of its $10.4B wireless spectrum bid, The Wall Street Journal reports.
- It would be Frontier's biggest deal ever. In Q3 Frontier noted cash on hand of $808M, debt/equity of 242.73 and a current ratio of 2.19.
- Verizon's also close to selling a package of cell towers for about $5B.
- After hours: FTR up 12.6%.
- Previously: WSJ: Verizon close to $10B asset sale (Feb. 02 2015)
Wed, Feb. 4, 1:11 PM
- Despite their CFO just last month saying certain customers would "leave us for price and we're just not going to compete with that," Verizon (NYSE:VZ) is cutting $10/month off the cost of most of its data plans.
- Customers have some flexibility but will have to opt in to the new prices.
- Verizon also said it would offer a one-time $100 credit to those coming in to switch from another carrier.
- Taken together, the moves are the clearest sign that VZ may feel heat from ETF-refund moves by other carriers, including Sprint's (S +2.6%) "cut your bill in half" promo.
Wed, Feb. 4, 11:42 AM
- Breakdown of FCC Chairman Tom Wheeler's op-ed on net neutrality: "Enforceable, bright-line rules" that ban paid prioritization ("fast lanes") and blocking/throttling of services, including for mobile broadband.
- The investment key for related stocks: "All of this can be accomplished while encouraging investment in broadband networks. ... My proposal will modernize Title II, tailoring it for the 21st century, in order to provide returns necessary to construct competitive networks. For example, there will be no rate regulation, no tariffs, no last-mile unbundling."
- FCC voting is scheduled for Feb. 26.
- Related stocks: (CMCSA +2.8%); (CVC +2%); (TWC +3.1%); (T +0.6%); (VZ +0.7%); (CHTR +4.3%); (DISH +2.6%); (DTV +1%); (CCOI +3.9%)
Wed, Feb. 4, 11:31 AM
- FCC Chairman Tom Wheeler has released an op-ed hinting at the commission's new stance on net neutrality rule -- and it suggests utility-like regulation for fixed and wireless broadband.
- "This week, I will circulate ... proposed new rules to preserve the Internet as an open platform for innovation and free expression. This proposal is rooted in long-standing regulatory principles, marketplace experience, and public input received over the last several months."
- Wheeler calls directly for Title II authority in "the strongest open Internet protections ever proposed by the FCC."
- Stocks on the move: (CMCSA +3.3%); (CVC +2.9%); (TWC +4%); (T +0.8%); (VZ +0.7%); (CHTR +4.3%); (DISH +3.3%); (DTV +1.2%); (CCOI +4.3%)
Sat, Jan. 31, 1:47 PM
- After learning which way AT&T (NYSE:T) went (high) and which way Verizon Wireless (NYSE:VZ) went (low) in the 11-week FCC wireless spectrum auction, most attention focused on Dish Network (NASDAQ:DISH): What are they up to?
- The satellite firm took just short of half of the available licenses (and saved over $3B by cannily working through small-business partners) but doesn't offer mobile service -- yet.
- Dish's fortunes in this auction were linked to those of Verizon, which is widely considered a potential buyer or lessee of Dish's spectrum assets. But Dish's Charlie Ergen has pursued wireless firms before (MetroPCS and Sprint (NYSE:S)) and may see wireless mobile as the next path forward from a slower-growing business.
- “I think [Ergen's] strategy is built around a confidence that spectrum will only become more valuable going forward,” says former FCC commissioner Robert McDowell.
- DISH closed the day out down 4.3%, slightly below where it was sitting before the auction results were released.
Nov. 24, 2014, 10:26 AM
- Citing higher spectrum and network investment costs, and the revenue impact of tougher price competition, Citi's Michael Rolling has downgraded Verizon (VZ -1.9%) to Neutral. AT&T (T -1.9%) is following Verizon lower.
- Rollins: "We believe the wireless industry is experiencing a great disconnect between the growth in data traffic and the growth in revenue ... We continue to fear that recent promotions create risk that the wireless industry at large may not be able to capture substantial incremental revenue from the rise in data consumption over time."
- Verizon has largely maintained its premium pricing in the face of major price cuts from T-Mobile and Sprint, but the carrier has been offering more data promos as of late. AT&T has been more willing to return fire, and has seen its wireless service growth revenue evaporate along the way.
- Last Friday: FCC auction bids hit $33B
Jul. 31, 2014, 1:02 PM
- France's Iliad (OTC:ILIAF) is offering $15B in cash for a 56.6% stake in T-Mobile USA (TMUS +7.3%) at a price of $33/share. Iliad values the remaining 43.4% at $40.50/share. Sprint (S -5.3%) has been reported to be planning a ~$40/share deal.
- Iliad says it has obtained financing from unnamed banks, and would also do a capital raise to help pay for the deal. One issue: Iliad has a current market cap of just $16B, less than T-Mobile's $24.8B and Sprint's $30.6B. Sprint has reportedly lined up a $40B+ debt package to finance a T-Mobile deal.
- A source tells the WSJ Iliad, which has upended the French mobile market with its aggressive pricing, views a T-Mobile merger as a "one-time opportunity to enter the world's-largest telecoms market."
- Iliad also thinks (perhaps with good reason, given FCC/DOJ remarks) regulators will be more comfortable with its bid than Sprint's, since Iliad has no U.S. presence.
- AT&T (T -2%) and Verizon (VZ -2.3%) have joined Sprint in selling off, as investors mull the possibility of a deal that would leave the number of nationwide U.S. carriers at 4. Concerns about Iliad's pricing history might also be weighing on shares.
- Related tickers: OTCPK:SFTBF, OTCQX:DTEGY
- Earlier: Iliad reportedly bids for T-Mobile USA
Jul. 29, 2014, 12:14 PM
- "I’m skeptical it can be replicated," says Elevation LLC's Stephen Sweeney about Windstream's (WIN +12.9%) REIT spinoff plans. "It’s very unclear if other large cap companies can have their companies viewed by the IRS as real estate."
- UBS also has its doubts: It thinks AT&T (T +3.3%) and Verizon (VZ +1.8%) would have to open up their networks to rivals if they were spun off into REITs, something it doesn't think the carriers will be keen on doing.
- Oppenheimer's Tim Horan is more positive, albeit while cautioning Windstream's spinoff isn't a done deal. "If successful with this restructuring, and there are obviously high regulatory barriers, this will be a game changer for the valuation of non-REIT infrastructure stocks in our industry.”
- AT&T, Verizon, Windstream, Frontier (FTR +11.7%), and CenturyLink (CTL +4.2%) have pared their morning gains a bit amid volatile trading on very heavy volumes. AT&T has seen 66M shares trade vs. a daily average of 19.3M; Frontier has seen 89M trade vs. an average of 6.9M.
- Enthusiasm about Windstream's spinoff stems not only from the tax benefits provided to REITs - American Tower's tax expense has been halved since it converted into a REIT in 2012 - but also from the potential for spinoffs to spark new M&A activity.
- Windstream CFO Tony Thomas: "The REIT is going to be uniquely positioned to be in a great spot to help unlock value at other companies ... We have a good understanding of how the REIT opportunity could work in the telecom landscape."
- Earlier: Telcos soar following Windstream's REIT announcement
Jul. 29, 2014, 10:14 AM
- Windstream's (WIN +22.3%) plans to spin off some of its telecom network assets into a REIT (following a favorable IRS ruling) has lit a fire under U.S. telecom carriers, as investors bet more REIT announcements will happen. Some might also be hoping REIT spinoffs spark additional M&A activity in an industry that has seen plenty of it.
- Frontier (FTR +15.8%) and CenturyLink (CTL +8.1%) are also off to the races, and AT&T (T +3.9%), Verizon (VZ +1.9%), and Sprint (S +2%) aren't doing badly either.
- Other gainers include Alaska Communications (ALSK +5.2%), TDS (TDS +4.1%), and Lumos Networks (LMOS +5.5%), as well as Level 3 (LVLT +5.9%) and merger partner TW Telecom (TWTC +5.2%). Level 3 posted a Q2 beat this morning.
- Windstream's spinoff will feature its fiber/copper networks and other real estate. The company expects to retire $3.2B in debt following the spinoff (expected to close in Q1 2015), and to have the REIT raise $3.5B in debt.
- Windstream plans to have an aggregate annual dividend of $0.70/share following the spinoff ($0.60 for the REIT, $0.10 for Windstream proper). That's down from a current $1.00/share.
Jun. 20, 2014, 12:16 PM
- The NY Post reports Verizon (VZ -0.3%) is eying Dish's (DISH +3.3%) high-frequency spectrum, estimated by analysts to be worth as much as $17B. One source states early, informal talks have been held.
- Dish has been looking for a partner for its spectrum, which is particularly useful for handling 4G traffic in high-density urban areas. After Dish's Sprint bid was thwarted last year, Charlie Ergen has said he's open to a T-Mobile deal. But Sprint and T-Mobile are now eying a merger of their own (regulators permitting).
- Verizon has been dealing with a 4G capacity crunch in many big metro areas; the carrier is responding by rolling out 4G in the high-frequency AWS band. Buying Dish's spectrum would give Verizon more long-term headroom.
- Regulators probably wouldn't object to a deal, given Sprint and T-Mobile each have considerable high-frequency spectrum. But with Verizon having $110B in debt following the Vodafone deal, balance sheet concerns could get in the way.
- The AT&T/DirecTV deal fueled speculation Verizon will make a bid to fully acquire Dish. But Verizon CEO Lowell McAdam quickly shot down the idea.
VZ vs. ETF Alternatives
Verizon Communications Incis a provider of communications, information and entertainment products and services to consumers, businesses and governmental agencies. Its two segments are Wireless and Wireline.
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