Craig Moffett shoots down deal rumors. There's lots of speculation about Verizon buying Charter or Comcast, giving them a local network to support their 5G build. Buying Comcast would cost $240B+, including $58B in debt. Charter would go for a modest $164B+, including $59B debt. They can build their own fiber networks for $5-10B, which looks smarter.

Moffett adds to the doubts by pointing out any deal would hurt Verzon's leverage ratio or dividend coverage. Both are already challenging. They could probably find the money somehow, I believe, but their balance sheet would wind up very ugly.

CFO Ellis in the latest quarterly report writes

  • That it is on track for a return by the 2018-2019 timeframe to the company’s credit-rating profile prior to the acquisition of Vodafone’s indirect 45 percent interest in Verizon Wireless in early 2014.

That would be all but impossible with a large acquisition.

Every part of the company is struggling and much cash flow is going to dividends. They've already cut capex ~20% in recent years, as a percentage of sales. It's hard to see where VZ would find the net income to pay down debt, even if they continue to squeeze down pension contributions.

Craig wrote it well and allowed me to reprint.  

VERIZON: A SOBRIETY TEST - APRIL 24, 2017

A few years ago, as Charter Communications was just beginning its long pursuit of Time Warner Cable, their parent company Liberty Media playfully played a clip from the Rolling Stones at their annual investor day.  The crowd laughed as a young Mick Jagger crooned that “Time, time, time is on my side.”

Now, Verizon is the pursuer, and to hear the company talk, it sounds for all the world that they have their eye on none other than Charter, or perhaps even on Comcast. 

Cue the Rolling Stones one more time.  “You can’t always get what you want.” 

When Verizon’s interest in Charter was first reported in late January, we illustrated the financing hurdles that would make buying Charter so difficult.  Verizon was then caught in a vise of high leverage and an even higher dividend payout ratio.  The more cash rich the offer, the more damage it would do to Verizon’s leverage ratio.  The more equity rich, the more damage it would do to Verizon’s dividend coverage.  There was no mathematical solution at the time for a mix of cash and stock that would keep Verizon’s leverage below 4x EBITDA and its dividend payout ratio below 80% Well, things have only gotten worse since then.  ... an adjusted leverage of about 3.4x – nearly a turn higher than their as-reported leverage.

Newsletter

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 Gig LTE & Massive MIMO ushering in the Age of Wireless Abundance

Wireless Abundance is here: What the new tech means http://bit.ly/Wirelessabundance
Sprint & T-Mobile Charge to be 1st in U.S. to Gig LTE bit.ly/STMOgig  AT&T bit.ly/ATTGIG2016
Kitahara of Softbank “I am crazy about Massive MIMO” http://bit.ly/MMIMOCrazy
20 Gig mmWave, Massive MIMO & Gig LTE at the Huawei MBBF http://bit.ly/Huawei20
LTE gets to the gigabit explained for non-engineers http://bit.ly/GigLteexplained
Massive MIMO explained. http://bit.ly/WHMassiveMIMO
2017's Big Gigabit story: Qualcomm 835 is ready http://bit.ly/BigGigLTE
Doubling speed with 4x4 MIMO & 256 QAM at T-Mobile http://bit.ly/2k1gEOQ
Netgear Nighthawk M1, Telstra do "gigabit class" LTE http://bit.ly/2k1s5Gq
Spectrum price down by half http://bit.ly/Spectrumhalfoff
Dish and the telcos see big asset cut http://bit.ly/auctionlosers
Shorts on 3GPP,  NYU research, Ralph de la Vega, 5G new radio

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5GW News

dave right5G? 4G? Whatever the name, wireless is going to a gigabit, soon.  I've reported broadband since 1999 and now is the time for gigabit wireless. Catch a mistake or have news? Email me please. Dave Burstein

 

Stories worth writing

Starry may match Verizon 5G at half the cost
OFCOM in UK: Share all spectrum, even licensed
OFCOM's Boccardi: 26 GHz worldwide: U.S. goes 28 
Verizon 5G fixed tests will be only 100's of homes
Massive MIMO FD at China Uni, Tele, Huawei, ZTE

 

 

 

Datapoints

Verizon and AT&T burying price increases in fees. 

Huawei's Richard Yu intends to pass both Apple & Samsung in smartphones in five years. 

The 3,000,000,000 transistor Qualcomm 835 is a revolution. Gig LTE, incredible cameras, better VR & AR, & ... State of the art CPU, DSL, GPU, ISP tightly integrated

1,000 T-Mobile small cells 2016, 6,000 more coming. Tech Life

New $84 Reliance Lyf Wind 7S has a 5" screen, a quad-core Snapdragon, an 8 megapixel camera, and some extras. Not state of the art, perhaps, but completely usable at a modest price. 

Orange/FT 4G covers 97% of Poland, 96% of Moldova, but only 84% in France, Q3 2016. They have 113.5 mobile customers in Africa compared to 25.5M in Europe.

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