Verizon Buys Fiber Optic Business
In a move to shore up its cell network and expand services to commercial and wholesale customers, Verizon Communications, Inc. (NYSE: VZ – $51.10) announced that it will buy Carl Icahn’s XO Communications’ fiber-optic network business for $1.8 billion. Verizon went on to say it would lease XO’s wireless spectrum with an option to buy it by the end of 2018. Demand for wireless airwaves has skyrocketed over the past decade as more Americans use smartphones to surf the web, make purchases and stream videos. The move, subject to regulatory approval, adds to Verizon’s aggressive mobile growth strategy. The company agreed to buy AOL Inc. in a $4.4 billion deal last May and launched go90, a new mobile video app in October of last year. The New York-based telecommunications company expects operational synergies of the purchase of more than $1.5 billion.
The share price of VZ has finally broken out of a long-term trading range and is currently close to its 52-week high reached earlier this month. However, this blue chip equity’s appreciation potential 3- to 5-years hence, in my opinion, remains above average with a valuation of 12.8 times estimated 2016 earnings. And the annual dividend of $2.26 per share yields investors an additional bonus of 4.4%.