Is AT&T buying out Verizon?
Based on the United States of America, AT&T and Verizon both provide wireless telecommunication internet services. There have always been rumors among the fierce competitors that AT&T could have future intentions of acquiring Verizon. From either of the two corporations, there hasn't been any free-maneuvering or information accessible so far concerning these speculations.
Here is a deeper look at the backdrop, justification, and probability that AT&T would purchase Verizon down-road.
History of Both Carriers
For a long time, Verizon and AT&T have occupied the telecom and cellular sectors. Early in the 1980s, Verizon first engaged in running wireline networks. Early in the 1990s, it began to participate in the cellular industry as Bell Atlantic Mobile and adopted the Verizon cellular name in 2000. Likewise, Alexander Graham Bell's businesses drove AT&T's founding more than a century ago. After the Bell System broke apart in the 1980s, AT&T rebuilt into many businesses offering wireless service, equipment, local and long-distance landline service, and so on.
Over the last two decades, Verizon and AT&T have engaged in the purchase of many smaller competitors to increase their cellular networks and consumer base throughout the nation. By the year 2021, they will have almost 70% market share in the cellular industry, ranking first and second among all the wireless providers in the United States.
Why Would AT&T Want to Buy Verizon?
On paper, there are some apparent advantages if AT&T were to acquire Verizon. The merger is that integration brings two colossal customer bases together; Verizon mobile telecommunication customer base of 120 million customers and AT&T with more than 120 million customers. It would also enable AT&T to exponentially increase the coverage area and network integration by acquiring Verizon’s network.
Synergy, which is the ability of the two companies to combine and create more efficient results than the sum of their parts could help in cutting costs, such as cutting on duplicated investments, management/administration expenses, sharing of infrastructure, and other related costs. In general, it can be regarded that the merger can lead to the improvement of efficiency and the realization of economies of scale.
Many of these benefits appear consistent with AT&T’s overall corporate strategy in the last ten years of acquiring companies and mergers, including its purchases of DirecTV and TimeWarner. It might even make them buy Verizon which will bring them scale, spectrum, and consolidation in the industry.
What are the Obstacles?
However, any potential acquisition of Verizon by AT&T Internet would undoubtedly face massive obstacles.
1. Market capitalization – With its valuation of over $200 billion in 2022, Verizon is a company with a significant market capitalization. To acquire the company, AT&T would have to spend over $250+ billion with the additional amount needed to buy out the shareholders. For AT&T alone, this would be a major expense and just goes to show how taxing these endeavors can be for any company.
2. Legal issues – a combination of the two biggest wireless firms in the industry would undoubtedly attract the attention of regulatory authorities. However, there would be questions to be raised concerning the effects of eliminating Verizon on competition and prices. The regulatory approval for the deal might pose a challenge irrespective of some divestitures being made to pave the way for the merger.
3. Convergence intensity - Verizon and AT&T are competing giants each serving over 100 million customers, hundreds of thousands of employees, copious amounts of physical infrastructure, and more. Managing such complex businesses with such vast scale would be a feat in itself from an operational and managerial standpoint.
4. Not likely to be backed by Verizon – As observed, Verizon has an enormous and strategic spectrum position, top position, good earnings, and cash flows – it is improbable that Verizon's leadership or its shareholders would approve of being bought out by AT&T today. Verizon has the market, brand name, network, and customer base to sustain its operations in the future even without the support of AT&T.
Thus in conclusion, – although, theoretically, AT&T buying Verizon looks quite logical when looking at the enhanced scale and synergies, in practice the price, regulators, integration, and lack of Verizon’s support will not allow this mega-merger to happen any time soon.
The Path Ahead
Although a full takeover is probably out of the question over the next three years, the two leading wireless carriers in the country may seek to expand cooperation in some sectors – for example, infrastructure sharing, spectrum, technological advancement, and services. Since 5G expansion calls for huge capital investment, joint ventures would be logical to enhance the rate of deployment for both AT&T and Verizon across the country.
Furthermore, if Verizon is to face more difficulties in the future years and gets financially weaker then one cannot rule out the possibility that AT&T may try to acquire Verizon in the longer run. This is only true if Verizon’s competitive position deteriorates much faster than expected and AT&T is ready to pounce. Nonetheless, considering Verizon has a lead in 5G coverage today, the probability does not rise in the short term without modifications.
Therefore, for the time being, it is expected that rumors will continue to circulate regarding AT&T’s possible bid to acquire Verizon. However, the fact of the matter is that these two competitors are still better suited to maintain the status quo of cooperating only in some aspects while simultaneously maintaining cutthroat competition in most of their operations vying for dominance in the future-centric 5G wireless industry. Unless there are drastic changes in the competitive dynamics in the future, the complete acquisition of Verizon by the competitor, AT&T, remains improbable.
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