Verizon’s New CEO Weighs Top-Level Shake-Up in 5G Push
(Bloomberg) -- All new CEOs like to put their stamp on a company when they arrive. But Verizon Communications Inc.’s Hans Vestberg may be taking things a step further.
Vestberg, who took over from longtime chief Lowell McAdam in August, is handpicking a new management team and personally interviewing the sprawling company’s top 300 leaders to identify who will help execute Verizon’s biggest network expansion in years, according to people familiar with the situation.
Not all executives are expected to make the cut, and some have described the process as re-interviewing for their jobs, according to one person, who cited conversations with individuals taking part in the meetings and asked not to be identified.
“Hans is a change agent,” said Roger Entner, an analyst with Recon Analytics LLC. “He’s transforming the company, that’s why he was brought in.”
The looming changes are accompanied by a broader overhaul that could push tens of thousands of employees out the door. Verizon said last week it offered buyout packages to as many as 44,000 managers -- more than a quarter of its total staff -- part of a $10 billion cost-cutting program put in place by Vestberg’s predecessor. The company also is transferring 2,500 information-technology employees to the India-based outsourcing firm Infosys Ltd.
Taken together, the changes will create a much leaner company -- one that Vestberg hopes can more efficiently roll out a lightning-fast new fifth-generation network.
The strategy is far different than that of Verizon’s biggest rival, AT&T Inc. Though that company also is preparing a 5G network, it’s been busy turning itself into a media conglomerate. AT&T completed its $85 billion acquisition of Time Warner Inc. in June, betting it can bolster the telecom service with ad revenue and TV shows movies that it owns.
Verizon, in contrast, wants to concentrate on what it does best: wireless service. With the transition to 5G looming, it’s hard to say that’s a bad idea, said Macquarie analyst Amy Yong.
“It is smart if they are refocusing on wireless, given what’s at stake with 5G,” she said. “They reaped so many rewards from being first in 4G.”
It’s no coincidence that Vestberg made his name in the nuts and bolts of networking. Though not an engineer, the 53-year-old Swede spent his entire career at telecom-equipment maker Ericsson AB before joining Verizon in March 2017.
His last years at Ericsson were challenging. After more than six years as the company’s chief executive officer, Vestberg was ousted amid criticism from a top shareholder. He also struggled with lengthy probes into the company’s practices in China and Europe -- and a year of disappointing financial performance in the face of competition from Huawei Technologies Co.
At Verizon, he’s making a fresh start -- in an enviable position. Verizon is already the largest U.S. wireless carrier, and new 5G bandwidth will give the New York-based company a chance to sell TV service across the nation.
“They could have gone with the status quo but the board picked a technologist at a time when they need it the most,” Entner said.
But Vestberg wants to get his team right first.
Chief Strategy Officer Rima Qureshi, who was hired November, is serving as one of the members of Vestberg’s evaluation team -- as is human-resources chief Marc Reed. McAdam, who remains Verizon’s chairman, also is being consulted.
Most of the new team should be selected by year-end, around the same time when Vestberg is expected start outlining his strategy to investors, according to the people.
Vestberg is said to be realigning the company to sell sets of services as a unified company. Verizon has traditionally relied on a more siloed approach, offering products via separate wireless, landline, data and IT divisions.
Getting an early lead in 5G is central to the effort. Earlier this month, Verizon began offering a version of the service in four cities, with plans to add more municipalities next year. But the rollout doesn’t work with mobile phones yet. Verizon is using high-frequency signals to beam data to home receivers, letting customers get speedy internet service and television in their living rooms.
Verizon is only slightly ahead of rivals. AT&T expects to launch 5G service in its first 12 cities by year-end. And T-Mobile US Inc. plans to begin service next year and will have a national mobile 5G service available in 2020.
Like his predecessor, Vestberg has shown little interest in big media acquisitions. The company previously scooped up AOL Inc. and Yahoo! Inc., using them to create a media and advertising division called Oath. But that’s nothing on the order of AT&T’s Time Warner deal.
Verizon will spend its money elsewhere. If he wants to maintain the company’s network superiority, Vestberg may need to shell out billions of dollars on new airwaves, 5G antennas and other infrastructure.
That’s a big undertaking and requires people who can pull it off, said Walt Piecyk, an analyst with BTIG LLC.
“For Vestberg’s plan to succeed, he needs to have the kind of team in place to execute a national construction project that can deliver the 5G services people have been promised,” he said.
©2018 Bloomberg L.P.