Verizon Takes $4.6 Billion Write-Down on Oath Unit

Hans Vestberg-Getty-H 2018
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The steep goodwill charge follows the phone giant acquiring Yahoo, which merged with AOL to form Oath.

Verizon Communications has recorded a steep goodwill impairment charge on its Oath media division.

The telecom giant said on Tuesday that the creation of Oath after it acquired Yahoo for $4.5 billion and merged it with AOL has led to a charge of around $4.6 billion during the fourth quarter of 2018. "The goodwill balance of the Oath reporting unit was approximately $4.8 billion prior to the incurrence of this impairment charge," Verizon revealed in an SEC filing Tuesday. That means Oath's goodwill value has been virtually eliminated.

Verizon acquired legacy internet giant AOL in 2015 for $4.4 billion as part of an effort to build out its media and advertising business. AOL CEO Tim Armstrong was retained to lead the division. In 2016, Verizon added to the portfolio with the acquisition of beleaguered internet company Yahoo. The combined operating division was renamed Oath and the goal was to reach 2 billion users by 2020. 

But amid a challenging climate for media businesses that don't have the scale of Google or Facebook, new Verizon CEO Hans Vestberg has retreated from the media business and doubled down on Verizon's 5G technology. Armstrong, meanwhile, left the company earlier this year.

"Verizon's media business, branded Oath, has experienced increased competitive and market pressures throughout 2018 that have resulted in lower than expected revenues and earnings," Verizon wrote in the SEC filing. "These pressures are expected to continue and have resulted in a loss of market positioning to our competitors in the digital advertising business. Oath has also achieved lower than expected benefits from the integration of the Yahoo Inc. and AOL Inc. businesses." 

Verizon's new leadership including new Oath CEO K. Guru Gowrappan, the filing continues, recently completed a five-year strategic planning review of the Oath business during the annual budget process "resulting in unfavorable adjustments to Oath's financial projections."