Verizon Bets A New Chief Will Hasten 5G Ramp Up -- WSJ
Hans Vestberg is an expert in network architecture
By Sarah Krouse
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (June 9, 2018).
Verizon Communications Inc. named Hans Vestberg as its next chief executive, choosing a relative newcomer to run the wireless giant at a time when its industry is being reshaped by megadeals.
Mr. Vestberg, who joined the company about a year ago and is its chief technology officer, will succeed longtime CEO Lowell McAdam on Aug. 1. Mr. McAdam will remain executive chairman until the end of the year and then become nonexecutive chairman.
Verizon's new chief was previously the chief executive of Ericsson AB. The 52-year-old Swede was ousted in July 2016 by the network equipment maker's board when he was unable to halt slumping sales and profits.
At Verizon, Mr. Vestberg will face the challenge of finding new pockets of growth for a market leader that is losing customers to lower-cost rivals. He will steer a business with nearly $120 billion in debt that has so far forgone a big media purchase, though it considered deals for 21st Century Fox assets and cable-TV firm Charter Communications Inc., The Wall Street Journal has reported
"We feel good about the assets we have," Mr. Vestberg said in an interview. His likely focus will be converting Verizon's network to so-called 5G technology, holding to a strategic view that it's better to deliver video content than create it.
Shares of Verizon have gained about 35% during Mr. McAdam's seven-year tenure, outpacing rival AT&T Inc. but lagging far behind the broader market. The stock was little-changed at $49 on Friday.
Wireless rivals have turned to deals to revamp their operations as the U.S. market matures. AT&T jumped into television by buying DirecTV in 2015 and has a pending $85 billion deal for Time Warner Inc. Smaller competitors T-Mobile US Inc. and Sprint Corp. struck a $26 billion merger in April, betting regulators will allow them to close the gap with the two bigger players.
Verizon's CEO appointment caps a multiyear succession process in which Mr. Vestberg and company veteran John Stratton emerged as the lead contenders. As president of global operations, Mr. Stratton, 57, oversaw most of the company's biggest units. He is no longer running the operations and plans to retire later this year, the company said. It didn't name a replacement.
Tim Armstrong, Verizon's top media executive, will remain in his current role overseeing the company's Oath business, which includes Yahoo and AOL properties. Mr. Armstrong, who was previously CEO of AOL and a Google executive, was seen by some outside the company as a potential successor to Mr. McAdam, but people familiar with the matter said he wasn't considered for the CEO job,
Mr. Vestberg was "a better match for where Verizon was going to go," Mr. McAdam said in an interview. "With 5G in front of us, we are at a huge inflection point. Whoever is at the head of the business should be able to see that through."
Mr. Vestberg, who spent more than 20 years at Ericsson, is an expert in network architecture. Mr. McAdam cited his successor's global experience at the helm of Ericsson and age as factors he and the board considered.
The appointment surprised some investors and analysts who viewed Mr. Stratton as the heir apparent. Past Verizon chief executives spent years at the company, often leading several different divisions as they rose.
Mr. McAdam said to remain competitive Verizon needed new perspectives. The board called its mission "identifying the next CEO for the digital world," according to a document reviewed by the Journal.
The company Mr. Vestberg inherits is looking to shed costs while fighting to defend its wireless-customer base of more than 116 million subscribers. In the first quarter, Verizon lost 24,000 postpaid phone connections, which are customers who pay their bill at the end of the month and rarely switch providers.
It is also investing in a faster network, though it is unclear how network providers will commercialize 5G. Mr. Vestberg said in the interview that Verizon's 5G residential service is his priority.
John Hodulik, an analyst at UBS Group AG who covers Verizon, said Mr. Vestberg was the executive who spent the most time over the past year talking to investors and analysts about the company's 5G-related plans. "At this point he's closer to the current focus of the company," which is building out its network and rolling out 5G technology, Mr. Hodulik said.
Mr. McAdam, who turned 64 last month, was named CEO of Verizon in August 2011 and at the time he told associates he only wanted to stay five years. Over the past year he has indicated to the company's board and analysts that he aimed to retire by his 65th birthday.
His signature move as CEO was the $130 billion buyout in 2014 of Vodafone Group PLC's 45% stake in Verizon Wireless. The deal, a major contributor to Verizon's current debt, was struck arguably at the peak of the U.S. wireless market, just months after T-Mobile began its "un-carrier" campaign that disrupted the industry. He later acquired Yahoo and AOL.
The former Navy engineer spent the later half of his tenure as chief bringing in more outsiders, including Mr. Vestberg, to mix up the backgrounds of top executives.
While the two men have known each other for about a decade through Ericsson's role as a Verizon supplier, they spent more personal time together as the board's process narrowed, the executives said. Mr. McAdam went on a boat tour of some of Sweden's archipelago with Mr. Vestberg and his wife.
Other executives the board considered in recent years included former Telefónica UK Ltd. CEO Ronan Dunne, who has been with Verizon since late 2016, and Marni Walden, who ran Verizon's nascent media business and left earlier this year. Candidates met with the board individually over the last two years, each writing a three- to five-page exposition of their vision for the company.
Mr. Vestberg started his career at Ericsson in 1991 and rose to the top of the company, but as its performance waned he became a lightning rod for criticism over his compensation and his preference for private business jets.
During his tenure, Ericsson ditched its consumer handset business and slashed thousands of jobs as it tried to combat the loss of sales to Huawei Technologies Co. and slowing demand in the telecom-equipment market.
Mr. Vestberg will relocate his residence from Sweden to New Jersey later this year.
As part of his promotion, Mr. Vestberg was given a one-time equity award worth about $10 million in the form of performance stock units that vest over five years. His base salary will nearly double to $1.5 million. Last year, including stock awards, his compensation totaled $9.8 million, while Mr. McAdam was paid about $18 million, according to regulatory filings.
Write to Sarah Krouse at [email protected]