Reports reveal that the shares of Charter Communications are up by 3.7 percent in the past week as Verizon Chief Executive Lowell McAdam said to some Wall Street analysts that it made “industrial sense” for Verizon to buy cable operations of John Malone. However, McAdam did not say that he is planning to make a move on Charter Communications or that there is any interest from the firm of Malone.
According to various sources, McAdam said at the discussion that the amount of debt that Verizon would need to raise to make such a deal could be a big problem. In addition to that, the regulatory environment under the administration of Trump would have to be figured out. Reports say that the shares of Charter Communications closed out at 288.26 dollars recently, and this is up by 18% since October.
Experts say that AT&T could prompt Verizon to buy Charter. AT&T not only owns DirecTV, but also has an agreement to buy Time Warner Inc. for around 109 billion US dollars in cash and stock deal. On the other hand, Verizon sold most of their Fios network to Frontier Communications in the month of April, and some of the experts believe that the sellout is to clear the path to allow a cable merger.
“For regulatory reasons, Verizon can’t dominate in Fios and cable, so it appears to have to set its sights on cable,” an industry source said. The source also added that Charter could be a seller under the correct conditions. Some reports even say that Malone and Charter CEO Tom Rutledge are going on with their ideas for Charter Communications. However, Verizon will need to promise enough autonomy for Charter to implement their own plans – only if “Malone and Rutledge are not ready to cash out.”
A JPMorgan analyst said on the news that Verizon could have Charter Communications in their sight that a merger “would bring a greatly expanded fixed footprint including the backhaul network that would help Verizon’s 5G efforts.” The analyst report also noted that, “the math is difficult to square” on such a deal. The report also adds that the high leverage and high multiple of Charter would make a deal much “unlikely” though.