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Blog: What does Vestberg mean for Verizon?

13 JUN 2018

Verizon is at a crossroads.

The operator is not only facing the momentous transition to 5G, but also a rapidly changing media and telecom landscape that is shifting the ground beneath its feet. And it is placing its bet on a relative outsider to keep it at the top of the pack.

In a surprise announcement, Verizon recently laid out its line of succession, tapping current CTO Hans Vestberg to take over as CEO from outgoing chief Lowell McAdam in August.

While some analysts saw logic in the move, others were shocked by the decision.

Though his resume includes credentials as Ericsson’s CEO, Vestberg was at the helm when the company’s fortunes took a turn for the worse, as net sales and income plunged and the vendor was forced to implement brutal cost cuts and layoffs to compensate. After six years in charge, Vestberg left Ericsson in July 2016 amid heavy pressure from investors.

However, he quickly landed on his feet, joining Verizon as CTO and EVP of network and technology in March 2017.

New blood
Vestberg beat out a number of internal candidates for the CEO role, including company EVP John Stratton, a Verizon veteran who appeared to be a shoo-in contender following what appeared to be years of grooming for the position.

Stratton, who clocked up a total of 25 years with the company when including its previous incarnation Bell Atlantic Mobile, stepped down from his role on the day Vestberg was named as McAdam’s successor.

CCS Insight principal analyst Kester Mann told Mobile World Live there is clear logic behind the decision to bring in a network expert as the company prepares to launch 5G, but noted Vestberg lacks key experience in the US market.

“Vestberg has not held a CEO role in the US before and has had only limited experience working for Verizon. Further, his appointment comes at a time of significant market upheaval: T-Mobile’s merger with Sprint will create a powerful number three provider, AT&T is seeking to transform itself with the acquisition of Time Warner and unlimited data tariffs are changing the ways in which consumers buy mobile.”

Mann added a candidate such as Stratton may have been considered a safer option, but said the company may have wanted “fresh blood to steer it through times of change”.

Recon Analytics founder Roger Entner agreed Verizon is looking for a new perspective, pointing to several other recent external hires.

“When you look at the last three C-level positions hired, they were all company outsiders. It’s like revolt against the old Verizon way by putting up completely new leadership from the outside. It will change the character of the company, no doubt about it.”

Focus areas
Just how much will change remains unclear.

Mann said it will be interesting to see whether Vestberg takes a different approach to mergers and acquisitions than McAdam, “who largely shied away from striking major corporate deals.”

But the choice of its CTO to lead the company forward appeared to many analysts as Verizon doubling down on its traditional network-oriented priorities.

In a recent research note, Wells Fargo Securities senior analyst Jennifer Fritzsche cited the choice as evidence of the “seriousness around Verizon’s fibre strategy” and focus on IoT, which the investment bank believes had been underestimated by the financial community.

“We see now more than any other time, perhaps, how very different a road and direction Verizon is going from its closest peer (AT&T).”

Fritzsche, of course, was referring to AT&T’s shift to a more media-oriented strategy through its Time Warner deal.

But its focus on the network doesn’t mean Verizon will let content fall by the wayside. Quite the contrary.

Tim Armstrong, head of Verizon media subsidiary Oath, told CNBC the faster speeds and additional compute power offered by a 5G network will enable new types of content including augmented and virtual reality experiences.

He said Vestberg’s appointment “really tells you how serious we are about 5G and building out the next layer of connected consumers”. Armstrong added he will be working closely with Vestberg and McAdam in the coming months on a forward-looking digital media strategy.

“Oath is probably the largest brand media company built for mobile in the world right now and we’re going to continue to scream down that path as fast as we can.”

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

Author

Diana Goovaerts

Diana joins Mobile World Live as its new US Editor, reporting on infrastructure and spectrum rollouts, regulatory issues, and other carrier news from the US market. Diana comes to GSMA from her former role as Editor of Wireless Week and...

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