All the chatter about a Charter deal is making investors edgy.
In a Sunday note, Wells Fargo Senior Analyst said negativity around the nation’s largest wireless carrier is “as high as I have ever seen” but cautioned onlookers against falling into a short-sighted panic.
The anxiety seems to stem from Verizon’s ongoing battle to stay on top in a fiercely competitive wireless market and uncertainty around the carrier’s plans to execute on a number of initiatives. Recent talk of a Charter merger, Fritzsche noted, only “added fuel to the fire,” raising concerns to fever pitch as investors worried about the impact of new debt should the carrier move forward.
As of the end of the fourth quarter, Verizon reported it already had a total of $108.1 billion in gross debt, including $103.1 billion of unsecured debt.
According to Fritzsche, words like “death spiral” were being tossed around, and Reuters on Friday reported bondholders were pushing the carrier to offer better terms on an exchange offer launched Wednesday for around $30 billion of debt on fears a future acquisition could make the new bonds more risky in the long term.
But in an attempt to soothe some frayed nerves, Fritzsche noted things are never as good – or as bad – as they appear.
“The one thing to note on VZ is that there are a lot of balls in the air right now where I fully believe there IS a plan but not one that can yet be talked about,” Fritzsche mused. “Think broadcast auction, Yahoo, XO, 3.5GHz spectrum – not one of these can really be spoken about in terms of how/if they fit to the VZ puzzle….yet. This is also an asset with a significant amount of FCF (over $17B this year by our estimates) and 100MM+ recurring revenue customers.”
While Fritzsche acknowledged the uncertainty around whether or not a Charter deal would actually materialize, she reminded investors Verizon isn’t a company that takes a reactionary approach.
“If they do something transformational, it will likely be driven by what it can do for the VZ core business – NOT just a copycat deal,” she wrote. “In fact, going against the herd is something VZ prides itself on.”