Reports indicate content deal, outright acquisition on the table
Verizon Communications has reportedly approached media conglomerate AOL about a possible deal that could include either a content partnership or outright acquisition.
Bloomberg reported that the telecom giant has not yet made a formal proposal to AOL, but that it has approached the company about either option. The report noted that Verizon’s interest in AOL is centered on “programmatic advertising technology” that it describes as the “automated buying and selling of ads online.”
The move would bolster Verizon’s Digital Media Services business as well as counter recent moves by rival AT&T to bolster its own content business. AT&T earlier this year announced plans to acquire DirecTV for $48.5 billion.
Analysts were skeptical of the Verizon/AOL rumors, noting that Verizon’s current financial position was being squeezed by increased competition in the wireless space, ongoing spectrum auctions and its recent $130 billion deal to acquire full control of Verizon Wireless.
“(Verizon) has a strategic goal of growing revenue at 4% or more and we feel this will be extraordinarily difficult in the current mature and extremely competitive wireless market,” noted Macquarie Capital analyst Kevin Smithen in a research note. “Buying a legacy business such as AOL’s, just to gain access to an emerging technology, has not been (Verizon’s) style. Furthermore, (Verizon’s) balance sheet is likely to be stretched by as much as ($25 billion) in AWS-3 spectrum purchases, making (an approximately $5 billion) deal difficult, especially with (free-cash-flow) forecasts recently moving lower.”
Verizon has in recent years looked to expand outside of the traditional telecom role, including the purchase of mobile and online content delivery platform provider EdgeCast Networks, encoding platform provider UpLynk and cloud-services provider Terremark.
Verizon is also reportedly looking to sell its cellphone towers that power a portion of its Verizon Wireless division. Analysts predict Verizon could garner up to $500,000 for each of its approximately 12,000 towers.
Bored? Why not follow me on Twitter?
