Verizon Sold its Towers

by Colin Berkshire

Verizon is a $120 Billion a year company. They are, more than anything else, a cellular telephone company. So it is forgivable that they sold off their landline business in California, Florida, and Texas. They previously sold off substantial landline assets in ten other states.

Now, if I ran a cellular company I would value three assets: My customer base, my radio spectrum, and my towers. Those are the golden geese of the Verizon business.

A well run business protects its golden geese and never trusts anybody else with them. For example, in the paper business we wouldn’t consider producing core, strategic products in a competitor’s plant. We couldn’t control quality, safety, or compliance.

So I find it surprising that Verizon closed a deal to sell off its towers for a mere $5 Billion. I mean, they are selling one of the three strategic assets of their business for the equivalent of 2-week’s of income. If we had an essential asset responsible for 80% of our revenues we would NOT sell it for 2 weeks of income. But Verizon did. Fools.

If you hear Verizon tell the story they did this inexcusable act so that they could pay down their debt.

This really makes me feel that Verizon would sell their only son to the devil for next to nothing.

You see, they got $5 Billion for selling 11,324 towers. $5 Billion. Only. Their debt is $130 Billion. They sold off their towers to pay one year’s worth of interest on their debt. This is worse financial management than the Federal Government.

To really be outraged it is worth noting how they ran up $130 Billion in debt. They didn’t run up this debt to build towers, not to buy spectrum, or to acquire other companies, nor to develop new technologies. They run up $130 Billion in debt so that they could buy back their own stock. Think about it, they bought their own stock in a company that sold all of its towers. Fools again.

Verizon once had the best cellular network in the US. Now, they have a lot of stock and no towers.

Well, it isn’t as bad as it looks. They have the right to rent space on the towers that they sold for another ten years.