MoffettNathanson, a market research firm, expressed a negative outlook on the potential acquisition of Frontier Communications (OTC:FTRCQ) (NASDAQ: FYBR) by Verizon Communications (NYSE: NYSE:VZ).
The firm labeled the move as a "terrible idea," suggesting that if there were any winners from this transaction, it would be T-Mobile, as it implies that T-Mobile would not be purchasing Frontier.
The analyst pointed out that Verizon's existing fiber-to-the-home (FTTH) network only covers about 9% of U.S. households, within a wireline footprint that spans approximately 17%, based on data from the Federal Communications Commission's (FCC) broadband map at the end of 2023.
The analyst noted that Verizon had previously deemed the upgrade of the remaining coverage financially unappealing and instead opted for modest expansions.
Furthermore, the analyst highlighted that Verizon had previously owned the majority of Frontier's assets and had sold them after deciding to focus on wireless services over wireline to achieve a more favorable wireless/wireline mix compared to their peer, AT&T (NYSE:T).
The internal debate at Verizon regarding a wireless/fiber convergence strategy was mentioned, with the conclusion that the strategy had been dismissed.
The firm's comments reflect skepticism about the strategic value of Verizon's reported move to buy back assets from Frontier Communications, especially considering Verizon's historical approach to its wireline footprint and fiber assets.
In other recent news, AT&T has been a focal point for several financial firms following its strong second-quarter performance. The telecom giant's financial results showed revenue and EBITDA aligning with market expectations, with free cash flow surpassing predictions, largely due to lower capital expenditures. Firms such as Citi, Oppenheimer, and Scotiabank have all upgraded their price targets for AT&T, reflecting confidence in the company's growth trajectory.
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