We've been pointing out for years that Verizon's renewed company strategy
has been to upgrade their prized markets to FiOS, sell or ignore the rest of their landline customer base, then fill in the gaps with LTE wireless broadband. The strategy was shaken up slightly recently when Verizon struck a massive new deal with the cable industry
that involved not only acquiring $3.6 billion in cable industry-held spectrum, but also an exclusive partnership that has Verizon selling wireless services to the cable industry's massive subscriber base.
Interestingly Wall Street wants Verizon to take this play even further. A new research report by Goldman Sachs
suggests that Verizon should sell off their wireline division entirely and become solely a wireless operator. Why? Doing so could allow Verizon to purge their union workers, pensions, and other expenses tied to their landline network and focus (in union with partner Vodafone) on where the real money will be: non union wireless and business services:
“The remaining wireless and enterprise businesses would have faster growth and a clear fit with Vodafone’s assets and strategy, making it a more attractive merger partner,” the analysts said in the report yesterday. Given that it no longer faces the threat of integrated cable competitors, Verizon could potentially spin off its remaining Consumer Wireline assets,” along with “large” pension and benefit liabilities, the Goldman analysts said.
In this case what has Wall Street's heart all a flutter is the possibility for Verizon to shed all union-related workers and their pensions. While it seems likely that Verizon will shed some additional unwanted DSL territories (upstate New York seems like an eventual option), it's highly unlikely that Verizon wants to exit a fiber to the home business they just got done investing $24 billion into -- even if the new management is rumored to be less bullish on landline.
Verizon's new cable deal is an interesting one. It's worrying consumer advocates, who have urged regulators to investigate whether the deal came with a gentlemen's agreement not to expand FiOS further
in order to limit competitive disruption in cable markets. That's obviously not good news for those in un-upgraded Verizon DSL markets waiting for faster speeds, and it's not good news for phone companies like CenturyLink, Frontier and Fairpoint (two of which gobbled up unwanted Verizon assets) who will now have to compete not only against cable, but Verizon LTE service that's faster than most of the DSL tiers they offer.