Will The Verizon-AOL Merger Help The Carrier's Lobbying Against Net Neutrality?

Verizon Communications Inc. VZ gave AOL, Inc. AOL investors an early Christmas present this morning. The wireless carrier -- which has a market cap of more than $200 billion -- announced that it will acquire AOL for approximately $4.4 billion. The deal (which values the stock at $50 a share) moved the market and raised AOL's value by more than 18 percent today. "The most interesting part of it is how this fits into Verizon's lobbying efforts on net neutrality," Cody Willard, chairman of Scutify (a financial social network) and Futr (a futuristic messaging app), told Benzinga. "Essentially, AOL was on the opposite side of the coin than Verizon and other broadband service providers." Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, told Benzinga that he (like everyone else) was a surprised by the announcement. "I was a bit surprised that Verizon is buying AOL but understand why they're doing it," said Moorhead. "Verizon, like many carriers, needs to find more value than the pipes. Most of AOL's content is news, but they have started to invest in video. Still, [it's] going to require a lot more investment on the part of Verizon."

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Propaganda 101

According to the Daily Dot, Verizon previously barred SugarString (a tech site it bankrolled) from publishing stories about net neutrality. If true, investors may worry about what Verizon will do with AOL's media properties, but Willard isn't sure they wield enough power to create real change. "Certainly there's what I used to call the Illuminati Factor of political propaganda and the control of the message," he said. "I don't know that AOL has enough of a presence, TechCrunch and Huffington Post not withstanding, that it's a powerful enough vehicle for much propaganda."

Unlikely To Move The Needle

Thus far, shares of Verizon have barely moved on the merger. "It's a lot of money by most standards, but [not] by Verizon's market cap," said Willard. "This is fairly two percent of their market cap. So it's unlikely, frankly, to move the needle -- and if it does, it's a lottery ticket that paid off for Verizon." In acquiring AOL, Willard doesn't expect Verizon to face any significant regulatory hurdles. "I doubt it because none of this is broadcast," he said. "There's no radio stations or television stations, which would be the more classic regulatory problem they would face. If anything, like I said, this actually opens up a can of worms in the net neutrality ballpark, which is probably the most important economic, fundamental, tectonic, plate-shifting thing that's happening in the Internet/app/wireless/broadband world." Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.