Verizon Might Be Considering DirecTV Bid

DirecTV Verizon

Verizon (NYSE: VZ) just might be ready to make a move on DirecTV (NYSE: DTV), the WSJ speculates, as the telco turns its concentration to video as its “core product.” Although Verizon made huge strides on rolling out its FiOS video and Internet service over the past three years — it’s gone from 200,000 FiOS subs in 2006 to 2.5 million as of last June; 600,000 alone were added in h109 — it remains the eighth largest among cable and satellite TV operators. Naturally, catching up to Comcast’s 23 million subs would be instant if Verizon could add DirecTV’s roughly 18 million customers. At the rate Verizon is going, without the acquisition of another system, it could take three years just to make it to fifth place among MSOs, WSJ estimates. Adding a large amount of subs is not just about bragging rights; without the kind of scale that it’s bigger rivals have, Verizon FiOS will continue to have difficult time on getting more favorable pricing from programmers.

A combo with DirecTV would offer both companies clear benefits. DirecTV, which is currently going through a restructuring with its primary shareholder, Liberty Media (NSDQ: LINTA), would be a more attractive acquisition target than its chief competitor, Dish Network, since it has been much more healthy financially. The tie-up with Verizon would allow DirecTV to offer extensive phone services, which Verizon has, as an additional incentive to customers. But Verizon does not have a clear path to such a deal. AT&T (NYSE: T) is considered likely to pursue DirecTV aggressively, should the opportunity arise.

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