Verizon Communications (Verizon) is one of the world’s leading providers of communications services. It provides wireless voice and data services in the United States and has a wireline business that provides voice, data, and video services, network access, long-distance, and other communication products and services. Verizon also owns and operates one of the most advanced Internet Protocol (IP) networks and has 135,300 employees.Verizon was formed as the merger of Bell Atlantic and GTE on June 30th, 2000.
However, there were many mergers involved that included companies with a history dating back to the 19th century. Furthermore, the wireless joint venture between Bell Atlantic and Vodafone was branded as Verizon Wireless, and Verizon also acquired MCI and branded that division as Verizon Business. This resulted in one of the biggest telecommunications companies with $7.4B in profit, $75.1B in sales, and $168.1B in assets.
The company is currently headquartered in New York. It has a market cap of $239.1B, revenue of $35.1B, and ROI of 7.97 in 2020. As of April 2019, Verizon’s subsidiary Verizon Wireless is the second-largest wireless communications service provider in the United States, with 153.1 million mobile customers. And as of 2017, Verizon is the only publicly traded telecommunications company to have two stock listings in its home country, both the NYSE (principal) and NASDAQ. The main competitors of Verizon in terms of market share are AT&T, Sprint/Next, and Metro PCS.
Verizon’s business focuses on enterprise customers who can be reached globally through the Verizon global business network. Verizon Wireless is focused on providing wireless services to consumers and businesses with nationwide coverage in the entire United States.
In order for Verizon to cater to the diverse requirements of its wireless and wireline, residential and business customers, it partnered with worldwide lead suppliers. The suppliers enabled Verizon to introduce lead-technologies in the network to provide customers advanced services of high quality. Lead telecom vendors, such as Alcatel-Lucent, Nokia-Siemens, and ADC Telecommunications, provided Verizon with solutions for networking gear, communication cables, test equipment, and network elements.
Verizon’s supply chain was not limited to traditional telecom vendors, but it expanded later on to include content providers and some OTT companies, such as Skype. These types of alliances enabled Verizon to enhance its product portfolio to competitively position itself as a total telecommunication solution provider for all telecom customers.
Verizon’s Formation
The mergers that formed Verizon were among the largest in U.S. business history, culminating in the definitive merger agreement, dated July 27, 1998, between Bell Atlantic, based in New York City, and GTE, which was in the process of moving its headquarters from Stamford, Conn., to Irving, Texas. GTE and Bell Atlantic had each evolved and grown through years of mergers, acquisitions, and divestitures. Each had proven track records in successfully integrating business operations.
Prior to the merger, GTE was one of the world’s largest telecommunications companies, with 1999 revenues of more than $25 billion. GTE served approximately 35 million access lines through subsidiaries in the U.S., Canada, and the Dominican Republic, and through affiliates in Canada, Puerto Rico, and Venezuela. (Access lines are the individual landline connections from a customer’s premises to the telecommunications network.) GTE was a leading wireless operator in the U.S., with more than 7.1 million wireless customers and the opportunity to serve 72.5 million potential wireless customers.
Bell Atlantic was even larger than GTE, with 1999 revenues of more than $33 billion. It served 43 million access lines, including 22 million households and more than 2 million business customers. It also managed one of the world’s largest and most successful wireless companies, with 7.7 million Bell Atlantic Mobile customers in the U.S. and international wireless investments in Latin America, Europe and the Pacific Rim. Bell Atlantic’s Directory Services was the world’s largest publisher of directory information, including operations in Europe.
The Bell Atlantic – GTE transaction — valued at more than $52 billion at the time of the announcement — was designed to join Bell Atlantic’s sophisticated network that served its densely-packed, data intensive customer base in 13 states from Maine to the Virginias with GTE’s national footprint, advanced data communications capabilities, and long-distance expertise. The purpose was to create a company with the scale and scope to compete as one of the telecommunications industry’s top-tier companies. The merger closed nearly two years later, following review and approvals by Bell Atlantic and GTE shareowners, 27 state regulatory commissions and the Federal Communications Commission (FCC), and clearance from the U.S. Department of Justice (DOJ) and various international agencies.
The beginnings of Verizon Wireless
In the meantime, on September 21, 1999, Bell Atlantic and London-based Vodafone AirTouch Plc (now
Vodafone Group Plc) announced that they had agreed to create a new wireless business — with a national footprint, a single brand, and a common digital technology — composed of Bell Atlantic’s and Vodafone’s U.S. wireless assets (Bell Atlantic Mobile, AirTouch Cellular, PrimeCo Personal Communications and AirTouch Paging).
This wireless joint venture received regulatory approval in six months. The new “Verizon” brand was launched on April 3, 2000, and the wireless joint venture began operations as Verizon Wireless on April 4. GTE’s wireless operations became part of Verizon Wireless — creating the nation’s largest wireless company — when the Bell Atlantic – GTE merger closed nearly three months later. Verizon then became the majority owner (55 percent) of Verizon Wireless, with management control of the joint venture. When Verizon Communications began operations in mid-2000, the leaders of Bell Atlantic and GTE shared management responsibility for the company.
Former GTE Chairman and CEO Charles R. “Chuck” Lee became Verizon’s founding Chairman of the Board and co-CEO, while former Bell Atlantic CEO Ivan Seidenberg became Verizon’s founding President and co-CEO. In accordance with a leadership transition plan announced at the time of the merger, Lee retired from Verizon in 2002. Seidenberg retired as Chairman and CEO in 2011 and was succeeded by Lowell C. McAdam, who became CEO in August 2011 and Chairman on Jan. 1, 2012. McAdam was Verizon’s president and COO before becoming CEO, and he was CEO of Verizon Wireless prior to that.
Also Read: Vodafone India – The Journey From Hutch To Vodafone To Vi
Wireless investment and growth
Through 2015, Verizon has made more than $110 billion in network investments in wireless. This is in addition to major spectrum purchases. In August 2008, Verizon Wireless expanded to many rural markets by completing its purchase of Rural Cellular Corp. for $2.7 billion in cash and assumed debt. In January 2009, Verizon Wireless completed its purchase of Alltel from Atlantis Holdings LLC, expanding the company’s network coverage to nearly the entire U.S. population. (Alltel had been formed in 1983, with the merger of two independent telephone companies: Allied Telephone in Arkansas and MidContinent Telephone in Ohio. By the time the transaction with Verizon was announced in June 2008, Alltel was a wireless company with approximately 13 million customers.) Verizon Wireless paid approximately $5.9 billion for the equity of Alltel. Immediately prior to the closing, the Alltel debt associated with the transaction, net of cash was approximately $22.2 billion.
In December 2011, Verizon Wireless announced agreements to purchase Advanced Wireless Spectrum (AWS) licenses from SpectrumCo – a joint venture of Comcast, Time Warner Cable, and Bright House Networks – and from Cox TMI Wireless. The spectrum licenses under the two agreements covered 93 percent of the U.S. population and the purchase closed in August 2012.
In January 2015, the FCC completed an auction of 65 MHz of spectrum, which is identified as the AWS 3 band. Verizon participated in that auction and was the high bidder on 181 spectrum licenses, for which it paid approximately $10.4 billion.
During 2015, 2014, and 2013, Verizon invested $9.9 billion, $0.4 billion, and $0.6 billion, respectively, in acquisitions of wireless licenses. This spectrum has fueled Verizon’s wireless network development and customer growth.
In March 2008, for example, Verizon invested $9.4 billion for a nationwide spectrum footprint, plus 102 spectrum licenses for individual markets around the U.S., in the FCC’s 700 MHz auction. Using this spectrum, Verizon launched its 4G LTE (fourth-generation Long Term Evolution) mobile broadband network in December 2010, the most advanced 4G network in the U.S., in 38 major metropolitan areas covering one-third of all Americans.
Verizon quickly expanded this network, announcing it would bring 4G LTE network to an additional 140 markets by the end of 2011. By year-end 2015, Verizon’s 4G LTE network covered approximately 312 million people in the U.S., including those in areas served by the company’s LTE in Rural America partners. In 2015, Verizon announced its commitment to lead the industry in developing and deploying 5G (fifth-generation) wireless technology, with field trials beginning in 2016.
By far, Verizon’s largest investment in wireless occurred in February 2014, when the company completed its acquisition of Vodafone’s 45 percent indirect interest in Verizon Wireless in a transaction valued at approximately $130 billion. The historic transaction – one of the largest in business history – gave Verizon full ownership of the U.S. wireless industry leader in network performance, profitability, and cash flow.
Why is it so successful?
Verizon has various strengths and weaknesses that are internal to the company. Its strengths enable it to compete effectively in the telecommunication industry in the US and other markets. The shortcomings of the company hinder its ability to rival efficiently.
The various strengths of the company include broad geographical coverage. Verizon has its wireless and wireline connections, serving the majority of the U.S. citizens, namely over 80% and 70% of residents respectively. The company boasts of high-speed wireless connections across the country. It rolled out fast and reliable to the customers 4G LTE network. Verizon has a strong financial performance that gives it a competitive edge over its competitors. It trades on the New York stock exchange and NASDAQ and Jow Dones. The company’s strong brand also provides a competitive advantage.
However, Verizon has its weaknesses that influence its trade negatively. The firm has a poor client service where clienteles protest about poor services from the client care desk. The customer care service is not present in many locations as compared to its competitors. In addition, Verizon products are costly as compared to those of competitors. Moreover, it has not taken advantage of markets beyond the US and Europe. Finally, the company has not achieved profitability growth of more than 4% since its inception.
Strategies – Corporate and Business
Corporate Strategy
Verizon communication has a corporate strategy for continued growth and profitability. The company envisages being recognized as a great organization that focuses on the customers and producing solid returns to its shareholders. Verizon’s mission reiterates its commitment to its customers through the provision of excellent communication services and experiences.
Its three-tier strategy entails the provision of wireless and wireline services over their superior networks to develop new businesses that target the Internet of Things and video platforms and the creation of increased revenue opportunities through applications and content. Verizon’s wireless business is currently performing well in the market. Verizon communication wireless business provides a high-speed 4G LTE network to its customers. The company intends to introduce the 5G LTE network to ensure its market leadership position.
Moreover, the wireline business has provided fast FiOS to its customers who are mainly households. The company has launched an Internet TV service to boost its revenue in this business. Verizon acquired Vodafone in 2014 as a strategy to serve more customers. It entered into joint ventures with companies such as Terremark Worldwide Inc. and CloudSwitch Inc. to reach more customers.
While Verizon has its services reaching more customers in the US and Europe, it has not tapped in the emerging markets which offer great opportunities for revenue growth. The company has a dense network of subsidiaries. Some of the subsidiaries include GTE Corporation, Verizon New York Inc., Bell Atlantic Mobile Systems LLC, Verizon California Inc., and Verizon Delaware Inc. among many others. Verizon’s strategy enables it to reach out to many customers as well as offering excellent services. However, the diverse network of subsidiaries has led to a lack of unified customer service.
Business Strategy
Verizon adopts a global differentiation marketing and competitive strategy at the business level. The company aims at providing unmatched services in the wireless and wireline segments. They provide superior quality services that ensure customer satisfaction. Through the differentiation strategy, the company has developed a strong brand name in the market.
Despite the high pricing of the services, Verizon serves numerous customers. It focuses on implementing new products and services to its customers. Investment in the upgrade of its network ensures that it maintains its leadership position in the market. It has invested heavily in customer relationship management as well as supply chain management to improve its services.
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