Seidenberg Calls the Shots at Verizon

The seat underneath Ivan Seidenberg is a hot one.

Seidenberg is president and co-chief executive of Verizon Communications, a company with $60 billion in 1999 revenue and the nation’s largest local phone company, with operations stretching from the company’s New York headquarters to West Los Angeles. Verizon also has a presence in 39 countries around the world.

That makes him a very busy man. Not long ago, the company melded together the wireless units of GTE, Bell Atlantic, AirTouch and PrimeCo PCS into a nationwide venture called Verizon Wireless. In the months since, Verizon has spun off merger partner GTE’s Internet backbone unit into a publicly traded company known as Genuity, completed the mega-marriage of GTE and Bell Atlantic and sold overlapping wireless units throughout the nation.

Last week, Verizon also announced plans to combine its high-speed Internet access operations with NorthPoint Communications Group to form a publicly traded company that will specialize in selling fast Web connections using digital subscriber line, or DSL, technology.

There’s also the small matter of resolving a volatile and highly visible strike by more than 86,000 workers represented by the Communications Workers of America and the International Brotherhood of Electrical Workers. They walked off their jobs when their labor contract expired at the former Bell Atlantic unit early on Aug. 6, triggering widespread disruptions in repairs and directory service and forcing managers to help serve the company’s 28 million customers spanning from Maine to Virginia.

Apart from that, Seidenberg and his colleagues are merely faced with the task of smoothly combining the people, cultures and businesses of Bell Atlantic and GTE, building the new Verizon brand (pronounced vurr-EYE-zon), and steering the company into the long-distance business for the first time since AT&T; was broken up in 1984.

At the moment, the numbers aren’t looking good. The company last week released disappointing financial results, and its stock price has fallen into the $40 range, down from a 52-week high of $69.50 in October.

In an interview before the strike began, Seidenberg talked enthusiastically about Verizon and its future.

Question: What things do you hope to change about how GTE has operated in California and what changes do you see for people who are customers in California?

Answer: It isn’t so much changing GTE as it’s changing our whole business. The two themes that we’re trying to really push very hard would be the expansion of our wireless operation and the movement of our core telecom business to become much more Internet- or data-centric.

We’re spending a lot more capital to put fiber in the network and to build out our DSL service. Obviously, build out the capacity of our wireless services, improve the marketing. When you migrate all this down to the end user, you see things like national one-rate plans for wireless, you see the introduction of wireless Web portals.

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Q: A new name gives you a sort of clean slate, but what about the challenge of making this new Verizon brand known?

A: There are always a lot of Jay Leno jokes about all this, and the facts are, when you look at this new company, GTE-Bell Atlantic, it’s really close to 12 brands that we’ve had to put together. So the only way for us to sort of cut across the top was to pick a new name and sort of suck it up for a couple of weeks or six months.

But it’s going to be easy. Every month, we will be sending out close to 60 million retail bills, then we have close to 100,000 vehicles on the road all over the country, and we have all the TV advertising that will be consolidated under the Verizon name. Then every month, millions of people will write a check out to us, or maybe even more than one--and that’s the quickest way for people to get to know who we are.

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Q: What challenges do you see unifying the PrimeCo, GTE Wireless, Bell Atlantic Mobile and the U.S. operations of Vodafone AirTouch under the Verizon Wireless venture?

A: We’re partners with Vodafone AirTouch [in Verizon Wireless], but we run the U.S. operation, and what they are is a big happy shareholder that gets a check every month. It’s the largest wireless operation in the country by far, and the employees are all unified under a single structure.

Wireless is growing so fast that one of the biggest challenges we have right now is to accelerate the capacity. I was in L.A. just the other day, and you could run into some capacity problems there. So we’re building out more cells [sites], more digital capability and doing that very quickly. The other thing is to add data. Now, we can give people the chance to get on their little handsets and dial up the weather; they can dial up the L.A. Times; they can do what they want.

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Q: Do you plan on an initial public offering of stock for the Verizon Wireless unit?

A: Yes, we do, probably in the fourth quarter. We’ve been saying [we’ll sell to the public] around 5% to 10% of the company.

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Q: Are you going to participate in any of the upcoming actions for additional wireless licenses in the U.S.? And if so, what is a fair price to pay for additional radio spectrum?

A: We need spectrum and we will participate in the [spectrum] re-auction, maybe even the new 700-megahertz licenses. On the cost, we always will pay the fair price and not one cent more. I think all the [price forecasts] I’ve been reading are a little bit inflated; they’re all very high. I think in every auction, the closer you get, the more real people will get. It’s valuable stuff, but it’s worth what it’s worth. It’s not worth what people say it’s worth six months before the auction.

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Q: What about overseas combinations with other companies?

A: What we’re interested in doing is connecting the largest commercial centers on the planet. So, yeah, where it’s appropriate for us, in a liberalizing market where we can get wireless and/or Internet-based services, into busy, growing, global, commercial areas, that’s kind of our linking strategy. So, the answer is, as the opportunity presents itself, we’re lookers.

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Q: Are you a buyer or seller?

A: We’re a big enough company that we’ll do all of the above. But the goal is to get scale and get bigger.

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Q: Some of the joint venture-type partnerships between big U.S. players and European players have not worked out that well. I’m thinking of the Global One three-way venture [now just France Telecom] and the partnership between AT&T; and British Telecom.

A: You put me in the same pew as those guys. We shouldn’t be there because they don’t work and play well together and we do. The reason I think that companies like Verizon would make good partners for global companies is because we have local distribution [through local phone lines]. And those international partners that have some form of local distribution, when you add the two together, you have a common basis for cooperation. We have a lot of very good [international] relationships, but we’d like to have some more. We’d like to maybe clean up some of the ones we have.

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Q: Do you see Verizon as a takeover target?

A: Well, I think that as long as our stock prices are below water, I think obviously you have to be prepared for anything. I think in the final analysis, however, what we’re trying to build is a company that will have a unique position in the marketplace and we’re willing to combine, to merge, to grow. So I would not rule out anything.

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Q: Do you believe, as others do, that the industry will eventually be dominated by a few global phone companies?

A: I think what you end up with over the next three to five years will be a handful of companies that will have reached the global market, not in every product, but at least in some. And they’ll set the pace. But then there’ll be hundreds of niche companies that will focus on either products or geographic markets. It’s obvious that a company like Verizon feels like it’s one of the five or 10 global players. I suspect [SBC Communications] would feel the same way. Other than those two, though, it’s a jump ball to me. All of the others have major gaps in where they’re going. So they’ll have to keep reinventing themselves, some of them will be the survivors, some of them will be the sellers . . . but whatever happens, you’ll continue to see the shuffling. It’s like free agents in basketball.