Verizon's CEO Choice Puts Focus Back on Industry Race Toward 5G
(Bloomberg) -- In elevating technology chief Hans Vestberg to lead the overall company on Friday, Verizon Communications Inc. sent a message to the rest of the industry: It’s doubling down on network expansion to ward off increasingly ambitious rivals.
While AT&T Inc. tries to complete an acquisition of Time Warner Inc. and T-Mobile US Inc. pursues its merger with Sprint Corp., Verizon wants no distractions. It’s betting that being first to build a faster fifth-generation network will give it an edge over competitors for years.
Verizon already sat out the latest round of potential deals -- such as bidding on CBS Corp. or 21st Century Fox Inc.’s entertainment assets -- even as archrival AT&T is attempting to make itself over as a media distribution giant. The company wants to stick to what it knows: networks. But the go-it-alone strategy also raises the stakes of getting its 5G transition right.
“Deals aren’t Vestberg’s strength -- his strength is with the network,” said Jennifer Fritzsche, an analyst with Wells Fargo Securities LLC. “It shows that Verizon is all about the network.”
Verizon, AT&T and Sprint have all been testing new 5G network equipment in select areas, aiming to be first out of the gate with connection speeds that promise to be 10 to 100 times faster. The idea is that dramatically new speeds will eventually help support self-driving cars, smart appliances and even surgical robots.
Verizon plans to start commercial 5G service by year-end in parts of Los Angeles and Sacramento. The initial product will be a direct wireless connection to a home receiver that serves as an alternative to stringing fiber-optic cable. Using a wireless broadband connection, Verizon will sell internet, phone and TV service to compete with Comcast Corp. and Charter Communications Inc.
Current Chief Executive Officer Lowell McAdam, whom the 52-year-old Vestberg will succeed in August, set the 5G plan in motion. He also steered Verizon away from buying traditional cable-TV programming. Instead, he bought online media in the form of AOL and Yahoo!.
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. The companies also have pitched that deal as a 5G strategy: They argue they won’t get a truly competitive network without joining forces.
Along the way, investors and analysts have looked for some kind of M&A response from Verizon. For now, at least, that’s not coming.
“If M&A drives your strategy you aren’t an effective leader,” McAdam, 64, 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.”
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