Verizon likely won't sell wireline assets, says analyst firm

Rumors may be swirling that Verizon (NYSE: VZ) is going to sell its wireline network assets, but a new Barclays report suggests that the service provider will not do so as the facilities are a key enabler for its wireless services.

According to a Barclay's report, Verizon management said during a sell-side analyst event hosted by the telco in their New Jersey offices that they could use the wireline assets, particularly the fiber assets as a backhaul mechanism for current 4G and upcoming 5G network rollouts.

"Verizon management highlighted that they are not interested in selling the remaining wireline assets as they now view ownership of fiber assets as key to delivering high-quality wireless services," said Barclays.

Although Verizon could sell off the wireline assets and just operate the wireless network--since both have architectures that have little overlap--it's likely that management wants to maintain control over its backhaul network.

Verizon does not have wireline facilities in every U.S. market in which it also operates wireless, and in those cases it has to work with third-party wireline providers. When the carrier announced its intentions to roll out 4G LTE in 2010 to 25 to 30 commercial markets, it leveraged a mix of fiber and microwave links from a host of alternative carriers such as CenturyLink, FiberTower and Conterra.

The carrier can also draw backhaul support from a growing base of incumbent wireline telcos like Consolidated Communications and Windstream as well as competitors like Level 3 Communications and Zayo.

It may be doing so already: for example, Consolidated reported in its third quarter results that it won contracts to equip 57 new wireless towers with an unnamed wireless operator in its wireline territory with fiber.

"We think Verizon can easily separate its wireline network from its wireless network should the company decide to sell the former. Therefore, we would attribute Verizon management's commentary on the criticality of wireline as part of its wireless network simply to the owner's economics associated with the wireline fiber assets."

As Verizon moves forward with its 5G plans, it's possible that the service provider could make a number of new investments including but not limited to building out new fiber facilities or purchasing a regional fiber provider.

"Verizon is looking to embark on a rapid wireless network upgrade to 5G, which will come with very high data speeds that will require robust fiber to the tower (FTTT) infrastructure as well as owner's economics on these fiber assets," said Barclays. "We believe given the impending data traffic surge associated with 5G, we could see Verizon pursuing further -- organic or inorganic -- investments in fiber assets, especially in the metro areas."

Regardless of the direction Verizon takes, wholesale wireless backhaul has been a big business for wireline telcos and competitive carriers with rich fiber assets.

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