The New York-based company, which announced its agreement to buy Yahoo!'s core biz for $4.8 billion on Monday, revealed the rationale behind its latest acquisition during its earnings call on Tuesday morning.
The telco's Q2 was bit of a mixed bag, with Verizon meeting Wall Street estimates for earnings per share but missing revenue. For the second quarter, Verizon posted 94 cents in EPS and $30.5 billion in revenue. Analysts were expecting 93 cents in EPS and $30.95 billion in revenue.
Shares of Verizon slightly slipped 1.5% Tuesday to $55.03.
In wireline, the telco saw its margins get pressured from the union strike, as well as the completed sale of higher-margin landline properties to Frontier Communications (FTR) - Get Report earlier this year. Verizon also saw weaker wireless subscriber growth in Q2.
As expected, though, the bigger story from Verizon's latest earnings was the company's purchase of Yahoo's core business for $4.83 billion, as well as its plans for combining Yahoo! and AOL. Just last year, Verizon shelled out $4.4 billion for AOL.
Verizon's agreed purchase of Yahoo!'s core business will make the buyer an "even strong competitor in digital media" and allows it to scale up in mobile media, said Verizon CEO Lowell McAdam in an investor call Tuesday morning.
"As we went into the auction process, we had a very good idea of what the synergies could be," McAdam further said, asserting that Verizon was likely "the only significant bidder" that had potential synergies with Yahoo!
Yahoo! kicked off its auction in February after pressure from Starboard Value, and Verizon was seen as a favorite to win even before the sales process formally started.
Verizon is particularly excited to about Yahoo! Sports, Finance and News, McAdam noted, adding that the buyer will create a lot of value by matching up these brands with AOL.
He explained that Yahoo! Finance is one of the most attractive assets of Yahoo, revealing that Verizon may partner with other bidders that participated in the auction to combine their respective visions for the brand.
In the sports area, Verizon will leverage AOL's existing relationships with the NFL and NBA to produce content during and outside seasons.
As for Yahoo! News, there's a strong opportunity to drive more traffic by integrating the brand with other sites under the AOL umbrella such as TechCrunch, Engadget and the Huffington Post.
"We've just made an exponential leap in capabilities," McAdam argued, further touting the synergy of combining AOL's hundreds of millions of users with Yahoo!'s user base of over one billion.
"Advertisers have come to us, saying they have more ads to place than good places to put them," he added.
Verizon's acquisition of Yahoo! is taking place as the company looks to invest in new areas such as digital media and advertising and the Internet of Things as its core businesses -- wireless and wireline telecommunications -- matures. The carrier is also juggling the evolving landscape of connectivity by preparing for the next-generation 5G wireless networks.
"VZ's 5G fixed wireless tests have shown promising results," wrote Wells Fargo analysts in a note Tuesday. "The key to achieve these speeds is building a dense fiber footprint."
The analysts also noted that wireless volumes remain weak, but that service revenue is improving.