As the business models across the industry converge, we actually see more opportunity for vertical consolidation than separation. Substantial synergies have been widely reported in recent mega-deals between telco/cableco and media companies. Assuming that these synergies can be realized, consolidation, versus separation, is the logical trend especially given that:The synergy potential in customer data monetization and advertising (i.e. personalized content, targeted advertising and customer data)Original entertainment content development costs are risingPremium sports content costs are showing few signs of dropping, with the market power now firmly with the sports federations (who have strong direct-to-consumer plays). Competing requires global scale and deep pocketsOpportunity to own the end-to-end consumer "engagement" platform within the home, and leverage as a launchpad for new products, services and offerings (both captive as well as third party).That said, there are several challenges that a combined entity will need to overcome. Those include:Success willrequire attention to the internal operating model and culture. Telcos/cablecos are often “left brain” and mediacos “right brain”. Force-fitting internal processes from the former onto the latter risks stifling creativity and bleeding talentThe value of the mediaco’s content needs to be maintained.The temptation may be to provide content from the media part of the business to the cableco distribution part at a discount to market rate, and even classify this as a “synergy”. This would destroy value. The content side of the business should be a profit center (not a cost center) and the content and IP it develops should be “sold” internally at market rate. It should also have the flexibility to monetize its library and production assets externally to maximize return-on-investmentHow a telco, with stable earnings, will deal with the inherently variable content business(and the failures which are bound to happen at some time). Telcos are viewed in the public market as stable / dividend investments and the consideration is that the uncertainty of the media and content business will take it into unchartered territory