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Verizon CEO: Combined Yahoo-AOL Will Be Platform to Test Over-the-Top Video Service

The long and tortuous sale of Yahoo’s internet business to Verizon is expected to close around the middle of June, according to Verizon chairman and CEO Lowell McAdam.

And once the deal is completed, Verizon would use the combination of Yahoo and AOL — with a total of 1.3 billion users — as the “platform… to test out an over-the-top service,” said McAdam, speaking at J.P. Morgan’s Global Technology, Media and Telecom Conference in Boston.

The exec didn’t provide any additional details on a possible OTT offering, which would be in addition to the telco’s Go90 ad-supported mobile video service. Verizon has reportedly been mulling an internet-delivered skinny bundle offering, akin to AT&T’s DirecTV Now and Dish Network’s Sling TV.

Verizon is paying the NFL some $21 million for rights to the Sept. 24 regular-season game between the Baltimore Ravens and Jacksonville Jaguars in London, and the telco will stream the game live across its portfolio of video platforms including AOL, Yahoo, Fios TV, Go90 and Complex.com. “That all goes to the AOL-Yahoo strategy,” McAdam said, meaning Verizon expects to amplify the distribution of the NFL live-stream across a large global audience.

The integrated AOL-Yahoo operation, housed under the newly created Oath division, will be organized around key content-based pillars: news, sports, finance, entertainment, and lifestyle. It will be led by current AOL CEO Tim Armstrong; Yahoo chief Marissa Mayer will not be part of the Oath management team.

Verizon’s deal for Yahoo is valued at about $4.5 billion, after the telco negotiated a $350 million discount in the wake of Yahoo’s two massive data breaches last fall.

McAdam noted that Verizon has shied away from engaging in “transformational” mergers and acquisitions, because “you end up with AOL Time Warner, things that are difficult to manage.”

The CEO again alluded to remarks he made in an interview last month in which he said the company would be open to M&A talks with Disney, CBS or Comcast if the opportunity arose. “I’ll say this about M&A: There’s a lot more energy on Wall Street and in the media than there is in most businesses at this point,” McAdam said. That said, “If there were an opportunity to accelerate the strategy, you should look at that.”

Said McAdam, “People want to know what we’re going to buy next, and we haven’t even closed on Yahoo yet.”

Verizon’s core focus is building out fiber-based networks and next-generation 5G wireless, McAdam said, noting the company’s $1 billion deal with Corning announced last month under which Verizon will buy up to 20 million miles of fiber-optic cable over the next three years. Verizon this summer is launching a test of 5G, which has the capacity to deliver 1 gigabit per second to wireless devices.

“On the connectivity side you can make a very good return [on investment],” McAdam said. “Consumers’ eyes light up when you can deliver a gigiabit to the handset.”

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