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Verizon and the media manipulation games

06 Sep

Verizon-WirelessWith Verizon officially not coming to Canada, there are some important questions that need answering. Mainly, how did all of this craziness happen in the first place?

The culprit, for good or for ill, is The Globe and Mail, which started the ball rolling on Jun. 17 with a report that the U.S. giant was eye-balling Canada. The newspaper followed that up with another story on Jun. 26 confirming that Verizon had indeed made a $700 million offer for Canadian upstart Wind and that it was also in talks with Mobilicity.

While the U.S. carrier confirmed that it was looking at Canada as a possible opportunity, it never officially verified the Wind offer, with the Globe attributing much of its information to unnamed sources. Only the reporters and editors involved are likely to ever know who those sources were, but one thing is obvious to the outside world: there has been a whole lot of game playing going on.

This is all speculation, but let’s start with what’s definite: Bell, Rogers and Telus positively freaked out upon learning of Verizon’s plans. Wireless executives generally don’t make a habit of deciding courses of action based on a couple of newspaper stories, so it’s safe to assume they made some phone calls to confirm what was really going on. Telus’s reaction to the news seemed to be the most over the top, what with lawsuits against the government and all, which makes sense since Verizon used to own a sizable stake in the company. Surely some Telus executives still have some of their American counterparts on speed dial.

In light of that, it seems highly unlikely that the incumbents would have gone ahead with their all-out war against the government if they didn’t have privileged information that, yes, Verizon really was seriously thinking about coming to Canada.

That makes chief executive Lowell McAdam’s comments about how the company “never seriously considered” expanding into the country seem rather disingenuous. For its part, Verizon had every opportunity to deny that it had made an offer to buy Wind, but it chose to let that one fester. That sure looks like game playing.

So who leaked the info? It would obviously have been someone with something to gain from doing so, but it’s hard to figure out who, if anyone, won from this whole situation. Conspiracy theorists have mentioned Wind, the government and even the incumbents as possibilities, but each of those suggestions range from unlikely to downright crazy.

If anyone came out ahead, it may indeed have been Verizon. While the wireless war was going on in Canada, the U.S. company was also negotiating with Britain’s Vodafone over its 45-per-cent stake in their Verizon Wireless joint venture. The company may have been playing a game of chicken, where it was subtly suggesting to Vodafone that it might soon turn its attention elsewhere and that it might not be interested in buying that stake for much longer. Could the company itself, or someone associated with it, have leaked the info to the Globe as a gambit in that negotiation?

Some observers have poured cold water on that theory by pointing out that Canada is a tiny gnat to the likes of Vodafone, so that would be a rather useless ploy on Verizon’s part. But adding credibility to the idea that Verizon was the leaker is the fact that the $700 million Wind offer was a rather specific number that was unlikely to be known to anyone outside Wind, the U.S. company or their bankers and lawyers.

The Vodafone agreement ended up happening, so did Verizon indeed play everyone, Canadian wireless executives included, or did circumstances merely change? McAdam says the Vodafone deal had no bearing on his company’s interest in Canada and logically, it shouldn’t have. The $700-million acquisition cost of Wind and even the $3 billion in associated spending analysts were figuring would be necessary for Canadian expansion was a drop in the bucket compared to the $130 billion the company had just shelled out to Vodafone. Out of those two options, the latter is therefore unlikely.

Either way, this all ended up pretty poorly for Canada. An awful lot of fuss was made, battle-lines were drawn, relationships were strained, harsh words were spoken and an awful lot of money was wasted through bouncing share prices and incumbent ad campaigns. And the country has nothing to show for it at the end.

The media gets manipulated all the time by self-interested sources, but in this sense it’s the country as a whole that lost out as a result. The challenge all journalists face when presented with juicy inside information is the ascertaining of the interests involved. In the wake of Verizon’s pullback, the deeper and far more important story now is who played the media and why? I wonder if that story will ever emerge.

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4 Comments

Posted by on September 6, 2013 in verizon

 

4 responses to “Verizon and the media manipulation games

  1. tomundone

    September 6, 2013 at 12:06 pm

    Verizon could have spiked the speculation early on, but they didn’t. They waited until quite recently, and I would suggest that was because they were serious about Canada: that the early speculation was actually correct.

    Also, consider that the most powerful companies in Canada spent an enormous amount of money, got into a public fight with the gov’t (with industry minister calling them liars) and generally made themselves look desperate and vulnerable, all in a bid to fight this perceived threat.

    They didn’t do this based on a few unattributed articles. They would have exercised every possible connection and lever they had to find out what Verizon’s true intentions were.

    So, the question is, why did Verizon change their minds about Canada?

     
  2. jvanl

    September 6, 2013 at 12:13 pm

    A silver lining is that the federal government now has even more justification for taking our incumbents out behind the woodshed.

    Their behaviour has been appalling.

     
  3. Jean-François Mezei

    September 6, 2013 at 1:17 pm

    I agree with you. Another example is the rumour that Mobilicity was to transfer its customers to Wind, a rumour that was luckily ended by Mobilicity’s CEO. (they may be in talks to do just that, but until it is confirmed, should any media report such rumours ?)

    Used to be that media rumours could bring a bank down.

    While the incumbents sure made a big splash of hysterics and theatricals this summer, I am not sure that it costed them that much money. Remember that except for Telus, they own much of the media used for those ads.

    But you are correct. Verizon, which would normally never comment on a rumour of acquisition, allowed the G&M rumour to go unchallenged and even supported it be confirming it was lookng at Canada. And it took a long time for it to finaly admit it was not looking at Canada. So if this was driven by another party, Verizon had to be complicit with the game plan. Who met with Verizon earlier ?

    What the Verizon rumour did was give Mobilicity false hopes, and potentially turn away bidders for Wind who may have bet a lower price. And by waiting so long before confirming it wasn’t coming here, Verizon left insufficient time for both Mobilicity and Wind to go to plan B before the Sept 17 deadline after which talking about mergers is prohibited.

    At the end of the day, a weaker Wind/Mobilicity benefits whom ? Bell Telus, Rogers.

    It is also entirely possible that Verizon really did look seriously at Canada, but the incumbent’s hysterical theatricals sent a strong message that they would make Verizon’s life so miserable in Canada that it would regret (write off) its investment here.

     
  4. Jean-François Mezei

    September 6, 2013 at 2:46 pm

    Additional comment: Large corporations never leak information about potential purchases until a deal has been reached or a formal offer (in case of hostile takeovers) is ready to go out. Leaking your opening bid to potential competitors who might also bid for same company is not smart.

    When a corporation leaks a vague intention, (as did Verizon), it is usually to stirr things up, possibly set a floor price for a transaction (forcing others to up the bid if they want to acquire that company).

    Verizon leaked at multiple separate times:
    1- Might buy Wind and/or Mobilicity and bid at auction.
    2- Price for alleged Wind transaction set at 700 million
    3- Won’t buy either but may bid at auction and buy Wind/Mobilicity later
    4- Not interested in Canada.

    If Verizon had been serious, the first leak we would have had would have been of an agreement for Verizon to buy Wind for 700 million, followed a week or two later by a formal announcement of the deal.

    The leak profile that actually happened does not match serious buying intentions. Since Verizon and canadian incumbents are best buddies, why would Verizon wish to antagonize them ?

    Say you were Bell, and your spies thell you that Carlos Slim might invest big time in Canada and block Belll/Telus from getting their C1-C2 shared network blocks. You can’t reveal this. What do you do ? Call up your buddy Verizon, make them leak false interest in Canada, giving incumbents a reason to launch their hysterical theatricals which sends a strong signal to Carlos Slim that he would not be welcome in Canada. (As well as setting a 700 million price tag on Wind which turns away potential investors who would have bid lower).

    Through their theatricals, the incumbents get brownie points from the minister since they give him an opportunity to shine and appear to defend the interests of Canadians against big bad incumbents.

    This of course is all speculation, but this is all we can do because we have no idea where those leaks came from.

     
 
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