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Verizon Restructures Top Management to Reshape 5G Future

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Verizon Communications Inc. (VZ - Free Report) recently announced two major leadership shifts — the retirement of Executive Vice President John Stratton and the appointment of Hans Vestberg as the new CEO, succeeding Lowell McAdam. Stratton is set to transition as a strategic advisor reporting to McAdam until his retirement from the company. Meanwhile, Vestberg will officially replace McAdam as the CEO, effective Aug 1, 2018, following which the latter will serve as Executive Chairman of the Board until he too retires at the end of this year to serve as the non-Executive Chairman of the company.

Game Changer?

The announcements came as a surprise to a number of industry observers, who had expected Stratton to succeed as the new CEO. Stratton has served Verizon for more than 25 years, aiding its significant growth in the telecommunications market.

On the other hand, McAdam has contributed substantially to the expansion of the company into content, creating the umbrella division — Oath — last year following the acquisition of AOL and Yahoo.

The dramatic leadership reshuffle marks a shift in Verizon’s focus from that of its close rival AT&T (T - Free Report) in the media content market. Experts predicted media content to be Verizon’s prime leadership path, and had anticipated aggressive steps to consolidate its position in this arena. However, Vestberg’s technical expertize underscores the company’s focus on 5G leadership, and his appointment proves to be a game changer. The company believes that strengthening its position in the future of wireless will have a huge positive impact across all its divisions including media content.

What Vestberg’s Succession Means for Verizon

Verizon aims to bolster its IoT position in the wireless market, as it lags behind AT&T in this field. Along this line, it can be said that there is a possibility that under Vestberg, the company will see a lot of non-digital media M&A activities, given his history of overseeing the acquisition of more than 20 companies for Ericsson (ERIC) of which he was in charge before joining Verizon. These M&A activities might include acquisition of several telecom services and IoT software firms. There is also high possibility of a sharp rise in radio and fiber infrastructure investments of the company, leading to tougher competition from cable and telco ISPs. This rise in investments and 5G efforts by Verizon, whose wireless customer base is the highest in the United States, might in turn hasten the merger talks between T-Mobile (TMUS - Free Report) and Sprint (S - Free Report) . If the merger materializes, Verizon’s new CEO will face a largely restructured mobile market.

Price Performance & Zacks Rank

In the past three months, the stock has outperformed the industry on an average, with an average return of 0.8% against a decline of 4.6% for the latter. Verizon currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.



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