Why Verizon stock wilted on Wednesday

it is Verizon Communications (See -3.38%) about to open their wallets for a massive new purchase?

It was a stock market drop on Wednesday, and on potential news that the telecom operator could spend a penny on a deal, investors dumped its shares. In late trading, Verizon’s price fell nearly 4%, a more dramatic drop than the 0.4% drop in S&P 500 index to point.

A potential deal that could easily exceed $10 billion

The Wall Street Journal published an article today stating that Verizon is in talks to acquire a broadband specialist Border communications (FYBR 37.95%). Citing unnamed “people familiar with the matter,” the financial paper said a deal announcement could come as soon as this week.

If realized, such an acquisition would be considerable. On news of the potential deal, investors bid up Frontier’s stock, pushing its market capitalization to more than $9.5 billion. That’s expensive even for a monster business with sustainably high levels of free cash flow (FCF) like Verizon. The already heavily indebted company will almost certainly have to find some external sources of financing, as cash and short-term investments totaled less than $3.8 billion at the end of June.

In considering a Frontier acquisition, it’s likely that Verizon wants to be more competitive in the broadband segment. The provision of mobile services is not exactly a growing area these days, while many regions of this country are still underserved by high-speed internet.

Easy integration?

While integrating two large enterprises is never a quick or easy task, Verizon and Frontier are relatively compatible. The latter’s broadband operation, currently being upgraded to fiber technology from legacy copper cabling, roughly complements Verizon’s Fios network.

Neither Verizon nor Frontier have yet officially commented diary article.