Verizon is reportedly considering a "combination" with Charter, which just recently bought Time Warner Cable. The rumored takeover sent Charter shares surging.
Should this purported deal go through, it would create a great telecom force with a wide reach in communications, both wired and wireless. JP Morgan already predicted a U.S. telecom consolidation under the more merger-friendly Trump Administration, but saw T-Mobile as the most likely to be part of a major transaction.
Charter, meanwhile, is one of the largest cable companies and it recently bought Time Warner Cable, forming a new force called Spectrum. Through this merger with TWC, Charter aims to make Spectrum the "fastest-growing TV, internet and voice provider."
Verizon Mulling Charter Deal
If a new report from the Wall Street Journal turns out to be accurate, things could get even more interesting. According to the WSJ, Verizon is considering a deal with Charter and has already started discussing the possibility.
"Verizon CEO Lowell McAdam has made a preliminary approach to officials close to Charter and Verizon is working with advisers to study a potential transaction," reports the WSJ, citing unnamed sources familiar with the matter.
The WSJ points out that there's no guarantee yet that a deal will actually materialize, but the prospect has nonetheless raised plenty of interest. Charter shares surged more than 7 percent in morning trading, following news of the potential deal with Verizon.
Neither Charter nor Verizon has offered any comment on the matter yet, but that's normal considering that companies rarely comment on potential deals that are still in the early stages of negotiations.
Nevertheless, such a deal would fall in line with recent industry rumors and market speculation that Verizon is on the verge of making a major move. Just last week, for instance, the New York Post reported that according to its sources, Verizon may acquire a "big cable company," with Charter or Comcast as the most likely targets. This move would reportedly be Verizon's answer to rival AT&T's efforts to buy DirecTV and Time Warner.
Just to be clear, Time Warner and Time Warner Cable are two different, separate companies.
For those unfamiliar with Charter, it's a growing company that sells cable TV and broadband subscriptions in local U.S. markets. The recent deal with Time Warner Cable was a great boon for the company, pushing its operations in big cities such as Los Angeles and New York.
As Charter is gaining ground, it would make a good asset for Verizon to take on AT&T, especially since AT&T's acquisition of Time Warner is pending. The DirecTV acquisition has turned AT&T into one of the largest subscription TV providers in the United States, and bagging Charter would bring Verizon on a par with its rival.
As always, however, such deals are subject to regulatory scrutiny and may not go through. AT&T's deal with Time Warner is still wading through the regulatory process and may not make it, as President Donald Trump previously vowed to block the deal because it would give AT&T too much power. Verizon's purported bid for Charter could have the same fate, but it remains to be seen.
Until an official announcement, make sure to take this news with a grain of salt.