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Verizon CEO: Telco No Longer Evaluating Cable Company Acquisition

Verizon Communications chairman and CEO Lowell McAdam said that while last year the telco was taking a look at potentially acquiring a cable operator, “we’ve moved on.”

“A year ago we went through a process of looking at cable companies — but the fiber infrastructure isn’t there,” said McAdam, speaking at Goldman Sachs’ Communacopia conference Thursday in New York. “For the future that we see that is going to need that kind of bandwidth, you’re going to need deep fiber in the network.”

McAdam noted the company’s recent $1 billion deal with Corning under which Verizon will build out 12.5 million miles of fiber-optic cable per year over the next three years. He also called out Verizon’s pact last month to buy a portion of WideOpenWest’s fiber network in Chicago for $225 million in cash, and its acquisition of wireless spectrum holder Straight Path Communications for $3.1 billion.

All together, those pieces will provide the basis for Verizon’s network “architecture of the future,” McAdam said.

That said, McAdam didn’t rule out future deals: “If we see something in the M&A space that makes sense to buy instead of build, we’ll do that.”

In January, the Wall Street Journal reported that Verizon was exploring scenarios for merging with cable giant Charter Communications. Then in the spring, Charter and Comcast announced an agreement to develop technical infrastructure for wireless operations, which dampened speculation of a Verizon takeover of Charter. Both cable operators have deals with Verizon Wireless, which is providing the national wireless network to power their mobile products.

About the combined AOL-Yahoo division, now called Oath, McAdam was bullish, saying he expects the digital-media group to grow from $7 billion in annual revenue today to $10 billion by 2020. Currently, the combined AOL and Yahoo properties reach about 1.3 billion users monthly and serve 1 trillion monthly ad requests.

Oath “positions us to expand our addressable market from the millions to the billions,” the CEO said.

“We’re not here to say we’re going to slay Google,” McAdam said. But “advertisers are looking for an alternative.” He said Verizon is currently negotiating some major deals for content that will be distributed across Oath, mobile and Fios TV service.

McAdam praised the technical talent of Yahoo’s engineering and product development teams, and touted AOL’s ad-tech and sales capabilities. “I think they’re both really happy to be together,” he said. According to McAdam, the one advantage of the delay in closing the Yahoo deal — caused by the two major security breaches the internet company disclosed last year — was that “the teams got to know each other” and were able to put together a comprehensive integration plan under Oath CEO Tim Armstrong.

At the start of the session, McAdam gave a shout-out to the work of Verizon employees in Houston and Florida in the wake of the devastating hurricanes that smacked those states. He said in Texas less than 2% of its cell sites went down and in Florida less than 10% of Verizon’s sites went out.

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