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Is Verizon Communications (VZ) Eyeing Disney Takeover?

According to recent reports by The New York Post, the U.S. telecom behemoth Verizon Communications Inc. VZ is planning to acquire The Walt Disney Co. DIS, a leading media and entertainment giant. However, neither of the companies confirmed the news.

It is to be noted that, exponential growth of mobile data usage supported by flourishing high-end smartphone and tablet devices has changed the entire industry dynamics of the traditional telecom and cable TV industry. Therefore, merger between telecom or cable TV operators and media giants has become crucial as both the sectors are aggressively delivering content on online digital platform.

Cable TV giant, Comcast Corp. CMCSA became a media mogul after acquiring NBC Universal in 2011. Also, Verizon’s closest rival AT&T Inc. T is currently awaiting regulatory approval for its proposed $85.4 billion cash-and-stock deal to acquire media giant Time Warner Inc. TWX. All three stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In fact, Verizon is no exception to this trend, as evident from its acquisition of AOL Inc. in Jun 2015. This buyout was an endeavor to derive maximum benefits from its mobile video platform as AOL provides advertising technology enabling automated buying and selling of ads online.

In Oct. 2015, Verizon acquired Millennial Media, a leading company that sells mobile ads across numerous websites and applications. Its advertising platform is designed to monetize applications for publishers and developers through the use of data-driven ad targeting. Recently, it acquired Yahoo's core assets including its search products, digital content brands, advertising and analytics as well.

Moving ahead, the U.S. telecom behemoth plans to unite its AOL division with Yahoo’s core Internet assets under one umbrella – Oath. This new division will be part of the company’s Media and Telematics organization. Additionally, the division will be overseeing a diverse house of more than 50 media and technology brands under Yahoo and AOL along with, engaging more than a billion people globally.

Ever since AT&T finalized its deal with Time Warner, the industry circle has been rife with the rumor that Verizon is looking to venture into the media and entertainment industry to remain competitive.  Moreover, prospects in the wireless industry are growing bleak due to a saturated market, telecom players are looking to boost revenues through the adoption of different strategies.

In this context, if Verizon finally decides to takeover Disney, we believe the combined entity will become a major player in the consolidated telecom-media space.

Notably, Verizon is the largest telecom operator with a nationwide presence in both the wireless and wireline front. In Oct. 2015, the company launched its ad-supported mobile video service go90 targeting the younger generation. Similarly, Disney has presence in film studios with a strong foothold in animation films, TV broadcasting operations with brand names like ESPN and theme park businesses.

Price Performance of Verizon

Year to date, the stock price of Verizon has witnessed a decline of 16.34% compared with the Zacks categorized U.S National Wireless industry’s decline of 11.57%. This, in turn, substantiates the Zacks Rank #4 (Sell) for this stock.

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Time Warner Inc. (TWX): Free Stock Analysis Report
 
Walt Disney Company (The) (DIS): Free Stock Analysis Report
 
AT&T Inc. (T): Free Stock Analysis Report
 
Verizon Communications Inc. (VZ): Free Stock Analysis Report
 
Comcast Corporation (CMCSA): Free Stock Analysis Report
 
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