Verizon Communications Inc. (NYSE:VZ) learned earlier Thursday that the U.S. Department of Justice will approve its $3.6 billion cable spectrum deal with the four largest cable-television providers – Comcast Corporation (NASDAQ:CMCSA), Time Warner Cable Inc. (NYSE:TWC), Cox Communications Inc. and Bright House Networks LLC – with some revisions to the contract that eliminated what the federal government deemed “anti-competitive” provisions, because they would have shut out AT&T Inc. (NYSE:T) and Sprint Nextel Corporation (NYSE:S), among others, from similar deals. The approval should be seen as welcome news for several hedge funds that have positions in Verizon stock, like Ray Dalio’s Bridgewater Associates.
As Verizon Communications Inc. (NYSE:VZ) expands on its 4G LTE wireless network (which we reported about yesterday),, it wanted to buy unused wireless spectrum from the four major cable companies – Comcast Corporation (NASDAQ:CMCSA), Time Warner Cable Inc. (NYSE:TWC), Cox and Bright House – in a deal worth $3.6 billion, in which the four cable companies would have access to various services provided by Verizon Communications Inc. (NYSE:VZ) and be able to bundle them with their already existing “triple play” – digital cable, Internet and phone.
The deal, which needs approval from the Federal Communications Commission, which regulates the wireless and cable-television industries, would have allowed Verizon and the cable companies to cross-sell their services across each other’s customer bases – but other wireless phone competitors like AT&T Inc. (NYSE:T) and Sprint Nextel Corporation (NYSE:S) were barred from the same arrangement with the cable companies. Not only that, but Verizon Communications Inc. (NYSE:VZ) has its FiOS network, which offers cable television and broadband Internet services – which then would make Verizon a direct competitor with Comcast Corporation (NASDAQ:CMCSA), Time Warner Cable Inc. (NYSE:TWC), Cox and Bright House.
The DOJ cried foul and filed and antitrust suit against all the parties in volved, before they decided to settle on this conprimise deal that is designed to continue competition.
As part of the compromise deal, Verizon Communications Inc. (NYSE:VZ) would be prohibited from selling its cable services in areas where FiOS is available to its customers. Also, the length of the agreement was reduced to five years, with an expiration date of December 2016 – at which time the cable companies – Comcast Corporation (NASDAQ:CMCSA), Time Warner Cable Inc. (NYSE:TWC), Cox and Bright House – would be free to contract with any wireless provider – Verizon, AT&T Inc. (NYSE:T), Sprint Nextel Corporation (NYSE:S), or others – to promote their services. Verizon Communications Inc. (NYSE:VZ) was also allowed to retain its right to bundle its DSL Internet services with satellite television companies. Verizon dropped out of such a deal with DIRECTV (NASDAQ:DTV) late last year.
“The department has provided the right remedy for competition and consumers,” said Joseph Wayland of the Department of Justice’s antitrust division, in a prepared statement.
