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Why Verizon Communications Inc’s XO Acquisition Is A Game-Changer For VZ Stock

https://bnlfinance.com/2016/11/19/verizon-communications-inc-xo-acquisition-game-changer-vz-stock/


When a $200 billion company makes a $1.88 billion acquisition, investors don’t expect it to be a “game-changer” for the stock. However, that’s exactly what XO Communications could mean for Verizon Communications Inc (NYSE:VZ) and VZ stock. The reason lies in why Verizon competitors tried so hard to prevent the acquisition, and specifically, what DISH Network Corp (NASDAQ:DISH) said in a petition to the FCC.

XO Communications was previously Carl Icahn’s spectrum asset and fiber business, covering 40 major U.S. markets with 1.2 million fiber miles. The acquisition deepens Verizon’s Ethernet penetration to fixed-line customers and could limit what VZ pays to fiber providers as it deploys small cells.

But more importantly, the purchase gives Verizon access to XO’s 102 LMDS spectrum licenses in 28 GHz and 39 GHz. In other words, it is very good bands of spectrum that Verizon can use to conduct 5G tests and soon deploy the technology.

Therefore, DISH, who owns a large band of AWS4 spectrum, petitioned the XO acquisition. In a statement DISH not only confirmed why the XO acquisition is so important for VZ stock, but how it gives Verizon a huge edge over the competition.

The two transactions would place Verizon, one of the two largest mobile phone carriers in the nation, in control of resources — specifically XO’s fiber network and Nextlink’s local multipoint distribution service (LMDS) and 39 GHz spectrum — that promise to play central roles in 5G applications and hence will be important to the companies competing against Verizon in the commercial mobile radio service 5G marketplace

Just as important, the transactions will eliminate current and potential competition between Verizon and XO in the mobile backhaul (both wireless and fiber), Internet transit, and enterprise and wholesale markets.

Remember, Verizon was already head-and-shoulders above all others in 5G, and 5G is going to be just as disruptive to 4G as 4G was to 3G. How XO Communications is a game-changer for Verizon

Not only has VZ already demonstrated wireless speeds of 3.7 Gbps, far faster than Google Fiber’s 1 Gbps, but with 5G Verizon will successfully blur the lines of wireless and broadband internet by removing the wires and delivering the fastest connection speeds imaginable to both wireless and wireline customers. This is the future, and XO has fiber connections in 45 of the top 50 U.S. markets.

With that said, 5G is clearly a huge opportunity for VZ, and the acquisition of XO gives it a huge boost to commercializing the network. According to DISH, XO Communication’s LMDS frequencies are the “next frontier” airwaves for 5G, and it “will be almost exclusively controlled by Verizon” now that the acquisition has been approved by the FCC.

Needless to say, Verizon’s acquisition of XO Communications is a game-changer for both the company and VZ stock, and honestly, I am shocked the FCC approved it.