Verizon Communications Inc. (NYSE: VZ) released earnings on Tuesday, which disappointed investors. The telecom posted a 4.9% decline in wireless service revenue, and average revenue per user also came in under expectations. Shares fell as much as 5%, eventually closing down 4.4%.
Investors are concerned that wireless service has become a commodity. Upstart competitors such as Sprint and T-Mobile are aggressively cutting prices to get market share, and chief rival AT&T has been pushing mobile video hard since it acquired DirecTV.
There’s a definite trend towards phone companies owning content providers. Remember, Verizon acquired AOL last year, and has pledged to acquire Yahoo’s web properties. AT&T is also in the process of acquiring Time Warner.
But at least one analyst doesn’t think Verizon is going far enough. Veteran analyst Craig Moffett thinks the company should merge with one of the largest media providers out there, Walt Disney Co. (NYSE:DIS).
Moffett suggests Verizon is closely watching AT&T’s potential acquisition of Time Warner. If it goes well, Verizon will likely pursue its own megadeal.
Many investors argue Disney is undervalued because the market is placing too much focus on its somewhat troubled ESPN division. Revenues there keep falling as more folks cut cable. If Disney is part of Verizon, ESPN’s woes won’t matter so much. Exposure to millions of Verizon customers will help too, but it’s not like ESPN has a distribution problem.
If Verizon doesn’t end up with Disney, it’ll likely take a look at other targets. This trend of telecoms acquiring media assets isn’t going away.
