Verizon's Uphill Spectrum Climb Grows a Bit Steeper
Verizon Wireless (NYSE: VZ) has been fighting an uphill battle when it comes to purchasing spectrum from companies slated to become competitors. Now, Reuters has claimed that the famous mobile device retailer will have to bend over backwards to finalize deals with the likes of Comcast (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC).
While current cable providers could certainly pose an insurmountable obstacle to overcome, it is not the case with Verizon's struggle. In fact, the Department of Justice (DOJ) and Federal Communications Commission (FCC) are said to be readying an approval for the company's proposal.
So who is left to stand in the way? According to Reuters, antitrust regulators have sought to place strict limits on controversial side deals as the additional spectrum would offer Verizon a leading advantage among competitors.
Monopolizing the wireless and cable industries has also become a slight concern as Verizon and Comcast dominate each, respectively. While new and improved technology would likely come from joint ventures between the two, antitrust regulators do not look fondly upon cross-marketing and promotion between the two giants.
Currently, Verizon is said to be offering $3.9 billion to assorted cable providers for a healthy piece of the spectrum pie. The company hopes to finalize negotiations in August, which Reuters sources believe is doable.
The deal's potential close comes at a time when Verizon maintained its ongoing reign and reported solid second quarter results. This has been a pattern for Verizon, with revenues rising four percent (or $1 billion) when wireline decline could have greatly impacted results. Gross margins also jumped from 60 percent to 62 percent.
With recent acquisitions such as that of Hughes Telematics and breaking into the cable television business, Verizon is making big moves throughout 2012. However, not everyone looks upon the strides favorably, as concerns regarding the company's new cable venture required “strong measures”.
The possible solutions are “strong measures that indicate DOJ had significant concerns about the anticompetitive potential of key features of the proposed agreement," an off-the-record antitrust expert told Reuters.
Regardless of raised eyebrows and ongoing negotiations, it appears that Verizon will inevitably close a spectrum cable deal soon, joining others such as Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG), who are rumored to be jumping on the television bandwagon as well.
Verizon closed Thursday at $44.62, up about 11.22 percent year-to-date.
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