Thursday, May 5, 2016

A Telephone Company?

Verizon has an asset, a very valuable asset. It is the spectrum. It is not the copper plant, given union costs the copper has become a liability. So sell the copper, they have done a great deal already. A second asset is the property. They have billions in off balance sheet real estate, in New York City and elsewhere. They have monetized some of this via selling off part of 140 West Street, my first place of real employment.

Back to the wireless. With 5G systems the can provide Gbps service to anyone. They are mobile but they are wireless, no copper and no union, and most importantly little competition, it's that asset again.

So what is management doing; they bought AOL and now are looking at Yahoo. AOL was dead in 1996! Time Warner bought a corpse. It has not risen from the dead. And Yahoo, the blood has stopped flowing there ages ago. Somehow corporate management gets infatuated with glitz. I saw this at Verizon before when they tried to get into content, hundreds of millions down the drain!

So what should Verizon do? Well we tried answering that several times a decade ago. Expand wireless. It is an oligopoly with oligopoly rents. Content is a hits business. I saw this at Warner, it only works when you are (1) really smart, and (2) you have a large portfolio. Steve Ross and his group were really smart. They could really pick winners. They also had a large portfolio. Telephone folks are not really smart. They run a utility, albeit a semi regulated one.

The rule there should be; leverage assets. Content does not leverage assets. It tries to compete with other content providers and some are really smart.

So what does the current strike do. It presents an opportunity to Verizon. Sell off the rest of copper, sell it to anyone, but first sell off the buildings with a sale lease back clause, for some period, not forever! Monetize the old stuff and focus on the new.