Verizon: Adding Frontier Makes Sense, but Not at Any Price

According to The Wall Street Journal, Verizon is nearing a deal to acquire Frontier Communications, a firm composed mainly of assets Verizon once owned. With Frontier shares up more than 35% on the news, Verizon would likely end up paying more than $20 billion, including assumed debt, a price we believe is excessive. The acquisition would mark the latest move within the US telecom industry to drive convergence between wireless and broadband services, a strategy we believe has merit, but not at any price. We’d be especially leery about this transaction if Verizon uses its stock, which, we believe, is significantly undervalued, as currency.