Verizon Names Vestberg CEO in Sign It Won't Join M&A Frenzy

(Bloomberg) -- Verizon Communications Inc. named Hans Vestberg as its next chief executive officer, picking a leader who plans to stay the course even as all three of the company’s major wireless rivals pursue megadeals.

The move will take effect Aug. 1, ending months of speculation over who takes over at the largest U.S. wireless carrier in the midst of a tumultuous year. Vestberg, 52, is succeeding longtime chief Lowell McAdam, who is less than a year from his 65th birthday.

Vestberg has been running Verizon’s newly formed network and technology unit, and his promotion is a sign of the direction the company is taking. The carrier plans to focus on improving its network in coming years, rather than trying to outdo competitors with blockbuster deals.

“I’m happy with executing the plans we have already laid out,” Vestberg said in an interview. “We are constantly evaluating things, but there’s nothing that we are looking at right now.”

The industry is racing to upgrade networks to a new standard known as 5G, which will offer faster speeds and the potential for new services and technologies.

Under McAdam, Verizon added online content from Yahoo and AOL. But its rivals have been pursuing more dramatic acquisitions. AT&T is fighting to win antitrust approval for its $85 billion takeover of Time Warner Inc., a deal that would give it a global source of entertainment and news content.

T-Mobile US Inc. and Sprint Corp., meanwhile, agreed to a $26.5 billion merger that would combine the No. 3 and No. 4 wireless carriers in the U.S.

Against that backdrop, McAdam had signaled that Verizon probably wasn’t going to take a similar tack. Though there’s been speculation that the company could buy Charter Communications Inc. -- the second-largest cable company -- he told investors in September that Verizon had “moved on” from pursuing any deals.

The CEO announcement didn’t startle Verizon investors. Verizon shares rose 0.2 percent to $49.12 as of 3 p.m. on Friday in New York.

McAdam will serve as executive chairman through his retirement at the end of the year, when he will become nonexecutive chairman.

McAdams’s retirement payout is valued at $48.8 million, as of Thursday’s market close. The majority comes from restricted stock awards, some tied to performance, that will continue to vest through 2021. Other benefits include amounts from his retirement and deferred compensation plans as of Dec. 31. Verizon executives may receive financial planning assistance when they retire, but as of last year McAdams hadn’t participated.

“If M&A drives your strategy you aren’t an effective leader,” McAdam said in an interview Friday. “Everyone wants to talk about who we buy next, but we aren’t going to be tricked into doing something stupid just to play in a game driven by ego.”

Time Warner Case

Still, the situation could change, especially with so much turmoil. The industry is waiting anxiously for a decision in AT&T’s Time Warner case, which is coming next week. A new CEO also will likely have a fresh approach, said Walt Piecyk, an analyst with BTIG LLC.

“As Lowell approached the retirement age, it seemed less and less likely that he was willing to take on a large acquisition,” he said. “The timing of the change could be good as the court decision on AT&T’s Time Warner deal comes next week. It could spur a new wave of M&A activity that is likely best conducted by the next CEO.”

Vestberg, the former CEO of Ericsson AB, joined Verizon a little more than a year ago, bringing vital network experience. At the time, he also took a seat on a three-member management team alongside Marni Walden, then media chief, and John Stratton, in charge of customer and product operations.

All three executives had been contenders to succeed McAdam, but Walden resigned late last year after learning she was unlikely to be named CEO. With Vestberg’s promotion, Stratton, a 25-year company veteran, announced he will retire by the end of this year.

McAdam described Vestberg Friday as someone with a “global view.”

“He speaks several languages and he’s lived in at least seven countries,” McAdam said in the interview. “He lines up with us on technology and culture, and has that outside view that I think we need. I’m a huge believer in diversity of thought in this business.”

©2018 Bloomberg L.P.

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