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Verizon Communications Inc. (VZ) Deal with Cable TV Irks Union

While Verizon Communications Inc. (NYSE:VZ) is apparently the winner in customer loyalty among all major wireless phone companies (with a reported churn rate of 0.84 percent according to its most recent quarterly earnings report) for a ninth straight quarter,  there is at least one group of people – some of which are so loyal, they have “Verizon Communications” on their chests – that is not expressing great satisfaction in Verizon’s business dealings.

Verizon Communications Inc. (NYSE:VZ)

Thursday, a group of activists, community leaders and members of the Communications Workers of America union rallied on Verizon’s local headquarters in Buffalo, N.Y., to protest a proposed agreement between Verizon Communications Inc. (NYSE:VZ) and cable-television providers, on the grounds that it would lead to layoffs and limit competition for consumers.

“It’s an end run around antitrust laws by calling it a marketing agreement, not a merger. But it’s a monopoly in all but name,” said Pete Sikora, legislative and political director for CWA District 1. However, a Verizon spokesman said the protest and related comments need to be put into context – after all, Verizon Communications Inc. (NYSE:VZ) is in intense contract negotiations with CWA over a new labor deal. Verizon has invested heavily in its wireless network at the expense of its landline network, and the union believes this agreement will compromise that work.

This is something that would be of some interest to many hedge-fund managers, as 27 hedge funds had positions in Verizon Communications Inc. (NYSE:VZ) at the end of March, which includes Ken Griffin’s Citadel Investment Group, which owned a $24 million position at the end of the first quarter of 2012 (increasing his stock position by 79 percent), and had both put and call options totaling $72 million at the end of the quarter.

The claim is the deal – which the Federal Communications Commission (FCC) and the U.S. Department of Justice (DOJ) are reviewing for antitrust reasons – would let Verizon Communications Inc. (NYSE:VZ) off the hook in expanding its FiOS fiber-optic network, which the company had installed in wealthier suburban communities but have not done in poorer, more urbanized areas such as Buffalo, according to the union. However, the company says it is focusing on increasing its subscribership in areas where FiOS is offered and it has no immediate plans to expand the network elsewhere.

The proposed deal with the cable companies would call for Verizon Communications Inc. (NYSE:VZ) to pay $3.6 billion to cable companies to buy more wireless spectrum and in exchange there would be a cross-marketing program with some of the cable providers. Verizon says it needs more spectrum before its wireless network runs out of capacity.

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