Change is Afoot- Alll About Verizon's New CEO Dan Schulman

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the two hundred and sixty sixth episode of The Week with Roger, a conversation between analysts about all things telecom, media, technology by Recon Analytics. I'm Don Kellogg, and with me again is Roger Etner. Welcome back, Roger.

Roger Entner 0m23s

Thanks for having me. You know, I'm glad to be back. Yeah. As some of you may know, my mother passed away and it's been a couple of difficult months because she was in and out of hospital several times. But I'm glad to be back.

Don Kellogg 0m39s

And the world did not stop while you were gone.

Roger Entner 0m42s

No, no, it did not.

Don Kellogg 0m43s

Lots has happened. Yeah. But I think probably the thing that's the biggest news that we should talk about is there's a new CEO at Verizon Mhmm. Dan Schulman. He comes from PayPal, but he was actually in telecom for quite some time before that, and you know him quite well.

Don Kellogg 0m58s

Yep. So I thought we could talk about that.

Roger Entner 1m0s

You know, we talked here on the podcast for a long time that Verizon's strategy under Hans Westberg was not sustainable. That by solely focusing on service revenue, EBITDA margin, and free cash flow that this creates a bad behavior pattern of basically trying to get more money out of your existing base, which drives then churn, which

Don Kellogg 1m27s

Well, think the term we use is blood out of the stone, right?

Roger Entner 1m29s

Yeah, it's bringing blood out of a stone and it works only so far. You know, Verizon has been the feeding trough of the industry. And I think when you look at the timing, the timing was the weekend after the third quarter closed, which to me indicates third quarter wasn't really a good quarter. And the board pulled the rip cord. I would say like, it's not long term planning when a 67 year old board member replaces 60 year old CEO when your mandatory retirement age is 65, right?

Roger Entner 2m6s

I wrote a piece about it where I said like Dan would probably stay two to three years. And when you look at the eight ks that came out with Dan's employment contract, you see that all the incentives are culminating at the 2027, which means Dan has a two year mandate. And I think it gives him the freedom as a board member. And Dan has been the lead independent board member, meaning since Hans was the chairman of the board, he was the second most important person on the board. And then, you know, was board member eight years, and knows the company very well, and was the deepest telecom knowledge.

Roger Entner 2m50s

You know, this gives him the mandate to do all the difficult choices that have to be made, where he has a two to three year mandate, he can do the right thing, can reset the ship and then hand it over, and in my opinion, Sampath is the heir apparent and would be the right choice, because a lot of things that need to be done is what Samath already articulated. Let's look a little bit about Dan. You know, one of my taglines is always numbers and facts don't make decisions, people make decisions. And if you know the person who makes decisions, have a much better chance of figuring out what they're going to do. Because leopards don't change their spots, and especially not 67 year old successful leopards.

Roger Entner 3m36s

And so if we go down memory lane, Dan was the youngest president in the history of the old AT&T as the president of consumer markets. So he knows how to run large companies.

Don Kellogg 3m52s

Large telecom companies.

Roger Entner 3m53s

Large telcos or large companies in general. They're all that, but especially large telcos. He knows how to run this. When we look at Hans, Hans never ran a wireless carrier or a telco. He came from a vendor and more importantly he came from a vendor having mostly finance roles.

Roger Entner 4m14s

He was not a consumer marketing guy. And Dan, if you look at Dan's resume and we're going to go through it line by line, it screams, you know, experience in how to market and disrupt consumer behavior and consumer offers. He ran AT&T as President of Consumer Markets. He left Dan to run Priceline and he grew the company from 20,000,000 in revenue to 1,000,000,000 in two years. That is really impressive feat, right?

Roger Entner 4m42s

And he basically put Priceline on the map that disrupted the way you can buy consumer goods, everything travel related. Then he was the founding CEO of Virgin Mobile USA, that's where I met Dan. And he grew that from nothing to more than 5,000,000 customers and 1,300,000,000 in sales, and then sold it to Sprint. And he ran it for a while while he was at Sprint. And one of the things he really did here, and he understands the youth market with this, is how to attack the market with a simple transparent offer, no hidden fees, prepaid model.

Roger Entner 5m21s

And very, very good, good, good offer here. He then moved on to American Express and became the Group President of Enterprise Growth. And again, he disrupted the market by expanding into mobile and online payments for underserved groups. So a very deep understanding of financials. Our colleague Joe Saleski, who has an incredible amount of background in finance, Dan is the first CEO in the telecom industry who knows payments extremely well.

Roger Entner 5m55s

Joe expects Dan to do maybe something here and an expanse here. And then most recently he's been the President and CEO of PayPal. And he really transformed the company from just a buy button to a full digital payments platform with a mission to democratize financial services. And he grew that company, he tripled revenue to 30,000,000,000, the customer base four thirty five million and the payment volume quintupled to 1,500,000,000,000 So this is really a blueprint of the things he has done. And what Scream says to me, he has the experience on how to run large companies, but then run this as disruptor.

Roger Entner 6m40s

And Verizon needs that. Right. What are the things

Don Kellogg 6m44s

we should expect right off the bat? I would imagine a new pricing construct, for example. Right? Like, anybody who comes in onboard a role like this is gonna that's the easiest way to impact the market. Right?

Don Kellogg 6m55s

I would expect more backing of kind of the prepaid side of things given his background or at least kind of a more simple value proposition?

Roger Entner 7m3s

On one hand, a more simple system. But at the same time, the perks that come with my plan are very, very good. They were very difficult to put together, You know, with very aggressive price points, and it helps people save money, they are still profitable for Verizon. I would expect him to make more hay out of that and expand this. I would expect him to double down on Sample's six twenty four project to use AI to simplify and improve the customer service experience.

Roger Entner 7m42s

Because Verizon's customer service needs improvement, let's say this way, right? And I think, you know, carriers in general need to get away from where every customer interaction is a pain point to something that delights people. I And think all the carriers are working on that. To interact with their customer in a positive way, rather than in a, okay, my bill was wrong, or this didn't work, or that didn't work, but something positive. T Mobile, Tuesdays, similar initiatives from AT&T and Verizon are going down that line.

Roger Entner 8m22s

And then he really needs to integrate Frontier. He comes with carte blanche where he can do whatever, because he's probably only going to stick around two years, maybe three, you know, he's 67 now, he doesn't want to run this into his 80s, right? There is a defined exit, you know, what you also have to look at it, I think Dan does this out of a tremendous feeling of beauty, and to do the right thing and appreciation of the long and storied Verizon brand and name. I've been working with Verizon since Ivan Seidenberg and Denny Strygiel's days and followed the company on its up and downs. And, you know, I think Dan will try to resurrect that spirit.

Roger Entner 9m8s

You know, it's interesting, I'm reading right now Ivan Seidenberg's book, Untethered, and it brings me down back memory lane. It's a very storied company, and it has certainly changed over the last, what, twenty years or so. And I think Dan will try to do the right thing and he doesn't need to protect the legacy or, you know, he can be very aggressive. He can say, hey, we need to fix this. We need to slash profitability, right?

Roger Entner 9m37s

We need to look at the dividend. I don't think anything is off the table or anything would surprise me that he would do.

Don Kellogg 9m44s

One of the challenges I think Verizon has is unlike T Mobile where they're very concentrated in some markets and they have a lot of room to kind of not worry about cannibalization in other markets. If you look at where they're pushing into small rural markets or B2B, they have very low penetration in those areas. And so it's easy to come in as a disruptor. Verizon is pretty well penetrated in many, many areas. And with the exception of maybe the youth market, any sort of kind of price action that they do is going to potentially cannibalize the base as well.

Don Kellogg 10m14s

It'll be interesting to see how it turns out. I mean, I have no doubt that he's going to do a little bit of that, but there are downsides to getting more on the pricing side. There are

Roger Entner 10m22s

always downsides. Right? Right. But one of the things that people don't realize is that Verizon is already the most affordable postpaid carrier in the country.

Don Kellogg 10m30s

I think it depends on the plan. Yeah. It depends on the plan.

Roger Entner 10m33s

Yeah. But it's a very attractive, you know, their unlimited plan is a very generous plan, maybe a little bit too generous, but it's a very generous plan for the price point. But yeah, he has to blunt T Mobile and they are relentless. AT&T is getting stronger, especially around convergence. And that I think is a good blueprint for Verizon of what they have to do at least.

Roger Entner 10m58s

And then you have cable, right? And so I would certainly expect, you know, Mint just came out with their Minternet offer. One of the things I'm fully expecting all of the wireless carriers to do is to launch an aggressive mobile and prepaid FWA at a price point that will hurt the cable guys even more. It should be a very exciting next two years plus.

Don Kellogg 11m25s

Yeah. Well, I think we have our work cut out for us. Right? And there's gonna be a lot of changes, I think, happening. Two out of the three MNOs have brand new CEOs.

Don Kellogg 11m34s

I think kind of the ground is kind of shifting under the industry a little bit as a consequence, and it'll be fun to watch out.

Roger Entner 11m39s

The good news is we know them pretty well, and we're asking now questions on 15,000 people on a weekly basis. I don't think anybody is in a better position but us to figure out what's happening and turn around on a dime, especially with all the work we're doing in AI. I'm so excited, and I don't think we've ever been in a better position to look at what's happening in the market and help our clients to exploit it.

Don Kellogg 12m6s

Yep, absolutely. Interesting times. Exactly. All right, Roger. Well, welcome back, and we'll catch you next week.

Roger Entner 12m13s

Thank you.