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Verizon (VZ) Chairman and CEO Lowell McAdam was not trying to break the Internet when he told Bloomberg that the telecom is amenable to deal talks with Walt Disney (DIS) , Comcast (CMCSA) or CBS (CBS) .
McAdam's words were "a little taken out of context," CFO Matt Ellis clarified during a Thursday morning earnings call, in which Verizon missed earnings and revenue expectations. "He was asked a question about if somebody called, would we take the call and would he have a conversation with them?" Ellis explained. "Of course we would."
Expectations that Verizon would pursue a mega-deal are understandable, Craig Moffett of Moffettnathanson LLC wrote in a Thursday report. "Verizon has become something close to a pure play wireless operator, and the wireless business is not a happy place,' Moffett suggested.
Verizon lost 389,000 post-paid phone subscribers in the first quarter, before the company reversed course and launched unlimited plans--something Verizon previously disregarded. The company turned it around in the rest of the quarter, but still lost 289,000 post-paid phones.
While Verizon has gone small with the acquisitions of AOL and Yahoo! (YHOO) , rival AT&T (T) has taken the much bigger step of agreeing to buy Time Warner (TWX) to package with DirecTV. Changing course and buying Disney or merging with Comcast would give Verizon access to a major content trove, though it might not solve the problems the business faces.
"Investors will naturally assume that the way out is M&A," Moffett wrote. "But there is no obvious acquisition or merger that would neatly solve Verizon's problems, or, more importantly, that would fix what ails the wireless business (although a merger between Sprint and T-Mobile, if it comes, might help)."
After McAdams' comments to Bloomberg, Barclays Capital analyst Kannan Venkateshwar suggested in a report that the communications industry is moving towards just three or four vertically consolidated telecoms. They will compete against companies such as Facebook (FB) , Alphabet's (GOOGL) Google and Amazon (AMZN) , which have powerful internet platforms but do not own infrastructure, Venkateshwar noted.
The two camps "are likely to use video as a way to attract subscribers into their respective ecosystems and then cross sell other products in order to monetize their platforms," the analyst wrote. The telecoms would have bundles of "wireless and wireline broadband, video, home security" while a competitor like Amazon would package "free shipping, music, echo, video, etc."
The Magic Kingdom of Verisney, a combination of Verizon and Disney, would certainly have plenty of video, by adding Disney's film studios, as well as ESPN, ABC and other media properties to Verizon's telecom offerings.
For the moment, Verizon may only be hypothetically amenable to talks with Disney, Comcast and CBS.
Until recently, however, Verizon was not open to going unlimited -- before subscriber numbers fell off a cliff at the start of the first quarter. Likewise, in January 2015 Verizon called reports it was in talks to buy AOL "not accurate." The telecom then announced that it would buy AOL in May.
If punishing wireless competition continues, Verizon's position on actually pursuing a mega deal could change.
Editors' pick: Originally published April 21.