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Verizon Plans Canadian Acquisitions

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With staggering competition at its home ground, Verizon Communications Inc. (VZ) is eying international opportunities. According to news reports, the company has proposed to acquire Canadian wireless provider Wind Mobile at an initial offer of $700 million. In addition, reports suggest that the company is in talks to buy Mobilicity, also a Canadian telecom company.

We believe the company’s entry into new markets like Canada would provide a significant opportunity to grow beyond the saturated US wireless market. However, with big players still calling the shots in the Canadian telecom space, we believe Verizon will have its share of challenges ahead.

The news of possible takeovers in Canada by telecom giant, Verizon, has started to threaten tier one Canadian telecom carriers like TELUS Corporation (TU), BCE, Inc. (BCE) and Rogers Communications Inc. (RCI). The Canadian market has been on the sidelines with share prices for these carriers closing below the previous day’s mark on Wednesday’s trade.  

Despite the small stature, we believe these companies would mark a significant stepping stone for the company in Canada.  Wind Mobile, which began its operations in 2009, has around 600,000 customers, which has almost surpassed the wirelesses subscriber base of the fourth largest Canadian wireless carrier – Saskatchewan Telecommunications Holding Corp.

Further, Mobilicity – targeted for acquisition by Telus in the past – has around 250, 000 subscribers. Although Mobilicity undertook no major expansion in the last two years, it continues to operate in key areas like Greater Toronto Area, Ottawa, Calgary, Edmonton and the Greater Vancouver.

Apart from acquisition, Verizon is seeking new ways such as new pricing actions, FiOS Quantum, copper-to-fiber migration and cost-cutting measures to drive FiOS revenue growth and maximize profitability. The new FiOS pricing plans (set-top boxes and planned bundled changes) would accelerate consumer revenue growth for the next several quarters.

Verizon has also collaborated with Starz – a top-notch global media and entertainment company – to launch STARZ PLAY and ENCORE PLAY. Overall, we believe these combined efforts would lead to improved revenue, high operating margins and greater market share.

Verizon, currently has Zacks Rank #3 (Hold).

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