US private equity group Apollo Global Management is close to acquiring Yahoo and the other media assets of Verizon Communications, people familiar with the situation said, as the telecom group shifts its focus to its core network businesses and a rollout of 5G wireless technology.
The contemplated deal, in which Apollo would pay between $4bn and $5bn for the assets, could be announced as soon as Monday, the people added.
It would mark a dramatic about-turn for the US wireless operator, which between 2015 and 2017 spent about $9bn to acquire Yahoo and AOL as the anchor properties of an online media division that became known as Oath.
The strategy reflected a mindset that was once widely shared among the world’s biggest telecom companies, which sought to benefit from an explosion in digital media consumption by becoming owners of content rather than mere network operators, or “dumb pipes”.
Netflix and Amazon have built huge online media businesses to serve consumers’ demand for on-demand video, while media companies such as Disney and ViacomCBS have raced to adapt their businesses to consumers’ shifting habits by building streaming platforms of their own.
But telecoms companies have on the whole struggled to establish themselves as creators and owners of the programming distributed over their cellular networks and wires.
Verizon’s struggles are not unique. Its larger rival AT&T acquired Time Warner, the owner of CNN, HBO and Warner Brothers, for $85.4bn about five years ago to build a streaming business capable of taking on Netflix.
The strategy has so far enjoyed mixed success. AT&T took a $15.5bn charge on its pay-TV business in January, as customers switch to streaming platforms from cable and satellite.
Verizon also hoped to create a content and marketing platform that would allow it to compete with Google and Facebook. However, it failed to win significant market share from its rivals, forcing it to reconsider the broader strategy, said a person with direct knowledge of the matter.
The sale of the media assets further underscores Verizon’s decision to double down on expanding its 5G internet services, which covered 230m people in more than 2,700 cities as of December last year.
Verizon incurred a $4.6bn writedown on its media businesses during 2018, after the brands “experienced increased competitive and market pressures . . . that resulted in lower than expected revenues and earnings”, the company said in a filing.
“Those pressures were expected to continue and have resulted in a loss of market positioning to our competitors in the digital advertising business,” the filing added.
Verizon also “achieved lower than expected benefits from the integration of . . . Yahoo and AOL”, it said.