Carrier Repositioning Through Leadership Changes

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the three hundred and fifth episode of the week with Roger, a conversation between analysts about all things telecom, media, and technology from Recon Analytics. I'm Brett Clark, and with me as always is Roger Etner. Roger, how are you today?

Roger Entner 0m23s

I'm great. How are you?

Don Kellogg 0m24s

Another day in paradise, as you like to say.

Roger Entner 0m28s

Yes. Indeed.

Don Kellogg 0m30s

So we got some leadership changes taking place across the industry. Most recently, a major announcement at T Mobile where Mike Katz is stepping away after two decades. Mike led many departments over his tenure, including most recently as the chief business and product officer. Coming on board at T Mobile as their new chief enterprise officer is Chris Sambar, who will be leading the SMB enterprises and government businesses. Roger, thoughts on the shakeup?

Roger Entner 0m54s

Well, Mike Huts is an American success story. He started working with T Mobile and their predecessor right when he was coming out of college, and he really made it from being in a store to being like one of the custodians of the Un carrier spirit. It's a marvelous career. You know, for me, Mike Cutts was always very tightly linked with Mike Sievert. They worked extremely closely together.

Roger Entner 1m28s

What we are observing here at T Mobile is with Srini Gopalan, a rebuilding, and we talked about this when Srini came on board, a rebuilding of the Un carrier into a company that is even more focused now on execution than it was ever before. I compared T Mobile under John Ledger as like Apple under Steve Jobs. Then Mike Siebert came as like the equivalent of Tim Cook, and he turned that revolution into a very finely tuned machine. And Mike Katz was like a key lieutenant here. With Greenie now being deeper in the saddle, and we saw like half a dozen of senior execs already leaving, the senior leadership team is like three quarters new.

Roger Entner 2m24s

We see that Srini is putting his team in place. You know, Andre Almeida, who came from Europe, one of his close lieutenants of Srini's lieutenants, he ran the expanded enterprise group that not only has business in it, but also like key ads and the AI efforts. He is now moving over as the president of marketing. So this is now a critical moment where for the first time, somebody who hasn't worked for John Ledger is now the standard bearer of the Un carrier spirit. And so it will be very interesting of how Andre will do that.

Roger Entner 3m6s

They hired Chris Sambar, who, up until about two years ago, was at AT&T, a highly respected executive, a terrific leader, straight shooter, great executor, one of the architects and implementers of AT&T's FirstNet success story. For the last two years, he was like the COO of a storage company, and now he's coming back to telecom. With Chris, T Mobile is getting a terrific executive. I am pretty sure in Dallas, they were not happy with this move. But, you know, when you lose a senior executive after, like, a couple of years, it's fair game.

Roger Entner 3m51s

When we look at T Mobile for Business, they're making progress. They're growing. When Kelly Fields was still around, she very often said like, oh, we had the best quarter ever in business. We doubled year over year. The thing is, what does T Mobile for Business have?

Roger Entner 4m11s

Today, maybe 10% market share in federal and in medium and enterprise, 20% on the low end, but predominantly focused and concentrated on the micro segment. The mobile for business, the more it looks like a consumer, the stronger they are. For somebody like Chris to come in, there's only upside, you know? And Callie's comments, when you know the real numbers, just highlight of how little the pace was before when you doubled the business when it was almost nothing before. Right?

Roger Entner 4m47s

In comparison, it's a huge number as a multiple. In absolute numbers, we always knew it was like modest, but you have to start somewhere. And so, Andre is handing over that portfolio, and I think Chris will execute very well here. You know, when we look at the different companies, AT&T is very strong in enterprise and large midsize. It's probably Verizon that feels his presence the most, who is very strong in the mid and smaller segment.

Roger Entner 5m19s

So will be interesting. Right?

Don Kellogg 5m22s

Yes. It will. Yeah. Well, let's see exactly where Chris takes this, where Callie left it off. And coming back to Mike for one second there, you mentioned the American success story.

Don Kellogg 5m31s

On his farewell LinkedIn post or his goodbye to T Mobile LinkedIn post, he mentioned that he started as a junior in college as an in store sales rep. So quite the success decline from there all the way up to the executive ranks all within the same organization.

Roger Entner 5m44s

Yeah. Really, really terrific. And a great guy. Right? And with him, T Mobile and you have to give T Mobile a lot of credit for rewriting telecom and, as they like to say, changing wireless for the better.

Roger Entner 5m59s

He has a big role in this. He was also instrumental in forging the MVNO between the cable companies and T Mobile for the business side. He never got enough credit for this. He was kind of the unsung hero here. I watched this over like five years happening, and how this slowly progressed forward.

Roger Entner 6m25s

And without him, T Mobile would not have closed that MVNO agreement. It was Verizon's to lose, and it was basically Hans who let it get away. You know, with Dan Schulman now at the helm of Verizon, I think they would have found an agreement, the cable companies and Verizon, that the relationship would have expanded to business. Now, does this make life easier for Chris Sambar? Not really.

Roger Entner 6m55s

You know, the cable companies just recently, and I don't think there was a big announcement about it, they fully launched on T Mobile. I would say that the cable guys the cable guys are coming for small and mid. They didn't do very well with the Verizon deal, where it was like up to, what, fifteen, twenty something like 20 lines or so where they could do. It was really anemic, that performance. Now that they have an offer where they can address up to a thousand lines, I would expect that the cable companies will get a lot, lot stronger in business on the mobile side.

Roger Entner 7m33s

So, it will be an increasingly crowded space where three very disruptive companies, T Mobile with a new leader, Charter and Comcast, especially a Charter that will have absorbed Cox soon, play the business market will be very, very interesting.

Don Kellogg 7m55s

Yeah. Without a doubt. You just mentioned Dan Schulman there, uh, pivoting at Verizon. Another round of layoffs took place yesterday, as well as the announcement of they are going to be selling 274 of their stores. So Dan continuing his focus on cost reduction and operational efficiency within the org.

Don Kellogg 8m12s

Any thoughts there?

Roger Entner 8m14s

Yeah. No. It was about 500 people lost their jobs. It was further cutting and not the large scale cutting, but a much more focused cut, mostly in corporate. And then, you know, reorientation of the business and of the stores.

Roger Entner 8m33s

Verizon now will have about 20% of their stores owned and 80% will be third party. And how you have to look at it, it's a fixed cost versus a variable cost decision. You have your highest performing stores are your corporate owned stores. They're in the best locations. They are bringing in the money and the cost is largely fixed.

Roger Entner 8m59s

The much more marginal stores, you typically put with a third party channel where you only pay for the ads that they bring in. And so, they looked at the numbers again and redrew the line of where it makes sense to own and that. You know, we mentioned it before, T Mobile made about six months ago the opposite decision of adding more company owned stores. For me, more company owned stores means you're more bullish that you have pretty consistent traffic where you put them. Whereas the variable decision, you don't know if it goes up or down, and you only want to compensate for performance is when you move towards mobile.

Roger Entner 9m43s

And so the implication is that Verizon looks at a much more variable gross ad mix. You know, we have to say, you put this in context, about two years ago, we had about 30,000,000 gross ads. Last year, we had about 40,000,000 gross ads. If you expect churn to come down, the gross ad number goes down too. I don't think overall net ad numbers will come up, especially with curtailed immigration in this country, both legal and illegal.

Roger Entner 10m15s

So if you feel bullish on churn coming down, you will also feel bullish on gross ads coming down, which means your numbers around stores will change.

Don Kellogg 10m27s

Yes. And also from the T Mobile front, a branding perspective, you own the overall experience. So you you are making sure that your employees are giving those customers exactly what they want. Obviously, you need the foot traffic to make that happen first and foremost. But, yeah, it's an interesting divergence the two oars are taking.

Roger Entner 10m43s

Yes. Absolutely.

Don Kellogg 10m45s

And last news here. At AT&T, about a month ago, Pascal Desroches announced he'll be retiring from a CFO position at the end of the year, and he will be replaced by Jennifer Beery. She's an AT&T alum, most recently CFO and COO at McAfee. Thoughts on Pascal stepping down?

Roger Entner 11m3s

Well, Pascal was the right man at the right time. He came in with John Stankey taking over as CEO, and he established a different tone than John Stevens had. Pascal really established faith and trust and transparency back into the AT&T numbers. Under John Stevens, they changed how they reported the number almost every quarter. And it was so difficult to reconcile of what's actually going on in the company and what the numbers said.

Roger Entner 11m43s

And as a result, none of the analysts trusted really AT&T's numbers. And a result, the stock traded at a discount of where it should trade. Pascal, who is a great person, really simplified how the company was reporting, made it a lot more transparent, which also helped the company then to fully demonstrate the success it has made over time, and how the company has focused on the fundamentals that has made AT&T an American icon. John Stankey refocused the company's strategy on convergence. And Pascal told the story very successfully to Wall Street and investors.

Roger Entner 12m31s

We did some work around investor relations. And one of the things that's also very interesting is about half of AT&T's shareholders are retail shareholders. And what came out of that work that we did is that PASCAL restored the trust of small investors in the company. Investor Relations typically only deal with the massive investors, which is only half of the universe. And so, you know, Jennifer is coming in.

Roger Entner 13m0s

She worked for John Stankey also before. When you go back when Jennifer worked for John the first time around, John was very effusive about the qualifications of Jennifer. And I'm sure it hurt him when she stepped away. And what you need in the relationship between the CEO and the CFO is a trusting relationship, you know, next to the COO. It's the most critical relationship you have.

Roger Entner 13m29s

I always like to say the CEO is the brain of the company. The COO is the heart in Jeff McAlfresh. He moves the blood through the organization. The CFO is the lungs. They supply the oxygen that the heart needs to push the blood through and to supply also the brain with oxygen.

Roger Entner 13m51s

And so John gets back somebody he knows, he trusts, and based on what he said in the past, admires and really gets along with. So, you know, congratulations to Jennifer. Welcome back.

Don Kellogg 14m4s

Yes. Definitely. Yes. Congratulations to Jennifer as well as Chris Sandbar at T Mobile, and, uh, all the best well wishes to Pascal and Mike Katz on wherever life takes them next. That is all the time we have today with Roger.

Don Kellogg 14m17s

Thank you all for listening. And Roger, thank you as always for the insight.

Roger Entner 14m21s

Thank you.