Actually, I've heard this rumor making the rounds too, with an unverifiable figure of $1.9B being bandied about as a price tag. Yet I'm more than a little hesitant to believe any of it.
Since Icahn took the company private, XO has been a bit of an enigma that outsiders have a hard time putting a valuation on. They are likely rather smaller in terms of revenue than we last saw them prior to when Icahn took the company private in 2010, as they have gone through several streamlining processes and aren't known to have spent capex at the levels of their peers to add footprint depth etc.
But according to the rumor, Verizon's supposed interest doesn't derive from XO's fiber assets or its nascent cloud efforts or its enterprise customer base, but rather from its nearly forgotten LMDS spectrum holdings. XO has long curated a large portfolio of that spectrum, obtained back during the dot com bubble. But aside from some small successes in fixed wireless connectivity, they have made little progress monetizing it over the years.
A big part of that is that LMDS spectrum (28-32Ghz) has its limitations operationally, and backhaul spectrum in these higher frequencies has always been more plentiful than demand. It's been relatively easy and cheap to lease, and hence most with a business case to use it have taken that path. Has the combination of wireless data juggernaut, small cells, and 5G conspired to shift the balance of power in LMDS's favor such that the big operators now envy XO's stockpile? I suppose the shorter distances and larger potential payload make it an interesting idea, but I'll believe it when I see it.
That being said, Carl Icahn really should have sold XO years ago. If Verizon or anybody else makes him a reasonable offer then he really ought to take it. He probably won't, but he should.