TELECOMS

Verizon Takes Three-pronged Strategy To Handling COVID-19 Crisis

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By Kelly Hill

Verizon CEO Hans Vestberg said that the telecom company is pursuing a three-pronged strategy as it navigates the impacts of the COVID-19 pandemic. On last week’s call with investors, Vestberg described managing the crisis response and continuing to execute on Verizon’s existing strategy, while planning for a future with a new, and more digital, “normal.”

“5G is still very much in the middle the center of our strategy,” he said. “We’re in the middle of the execution, and we’re not halting that. We’re keeping it up all the time and the team is doing great work there. And we see opportunity with 5G going forward, both with building all the cities, the 5G mobile edge compute as well as making this nationwide 5G still this year. … We need to have a multi-pronged strategy where we’re managing the crisis at the same time, but that doesn’t mean we should not execute on our strategy.”

The first prong of Verizon’s approach, he said, is crisis management, and Verizon has a team that is “dealing with all the challenges with pandemic for our employees, for our customers and for the society at large.”

Secondly, Vestberg added, the majority of his leadership team is focused on business as usual — and for Verizon, that means continuing to execute on its 5G and mobile edge computing strategy.

He added that Verizon is “not holding back on … transformation,” pointing to its recently announced acquisition of virtual collaboration company BlueJeans. Verizon has been a distributor for BlueJeans for a couple of quarters, he noted, and “felt that it was a good opportunity to actually make the acquisition” as Verizon looks forward to 5G use cases for Verizon Business.

Vestberg said he sees BlueJeans as “a great opportunity for the 5G. Because ultimately 5G at the edge, we will have a lot of low latency enormous throughput where video and transcoding will be important. So, adding that asset is also important for the future,” Vestberg said.

The third team is focused on thinking about the “new normal” and the post-pandemic business landscape, Vestberg said. “What will be the new normal when we come out on this pandemic?” he said, adding that Verizon expects to see a much more digital, omnichannel ordering demand from customers, which he says Verizon has already pivoted to — including digital agents that walk customers through in-home Fios installation, so that field techs are only being sent to customer locations for critical matters. That also means thinking about what new work environments will look like and different product demands, he added, going on to say that “we’re also going to see things that we never thought were possible” such as increases in telehealth and remote education. “All that’s going to be new normal, where … our assets are extremely important in that delivery to all our customer groups.”

“We have all these three prongs working at the same time, in order for us to come up even stronger from this crisis, as well as managing today and not missing our target … as well as managing the crisis at the same time,” Vestberg said.

He said that Verizon continues to “feel good” about its network strategy to implement Dynamic Spectrum Sharing (DSS) to expand 5G coverage. He said that the carrier is continuing to do the testing and deployment of equipment in the field for that, and that Verizon is not having supply chain issues related to DSS implementation.

“I’m certain that [CTO] Kyle [Malady] and his team will put it in the hands of [Verizon Consumer Group CEO] Ronan [Dunne] and [Verizon Business Group CEO] Tami [Erwin] and decide when they turn it on in the second half. That’s where we are today,” he said.

Asked about Verizon’s millimeter-wave-based, urban-centric 5G deployment strategy, considering the abrupt increase in telework and remote education, Vestberg said that “a little bit too early to say that we’re going to have a changed total social pattern in the United States.”

“I feel pretty confident that dense urban areas will continue to be dense urban areas. At the moment, we still see a lot of usage in dense urban areas. It’s just that we see less movement of people because they are staying home,” said Vestberg. “People live where they live today. So we are not changing the strategy how we execute both on the broader nationwide, as well on our city deployment.”

Other key takeaways from the call included:

-Verizon saw heightened enterprise demand for its products and services in March, particularly in wireless, its mobile hot spots, virtual private network services (which have been surging in usage) and high-speed circuit capacity, according to CFO Matthew Ellis.

-By the middle of March, Verizon had seen a “dramatic shift in customer behavior” as retail and business activity halted across the country, while demand increased from the public sector and some large enterprise customers. Closing nearly 70 per cent of its stores affected Verizon’s customer activity: consumer wireless gross additions were down nearly 50 per cent from the same period last year, and upgrades were down around 40 per cent. Overall, he said, device activations have been down since mid-March and Verizon expects that to continue in the second quarter and for there to be uncertainty around customer behavior for the rest of this year.

“We have limited visibility into the second half of the year, which will depend on various potential operating environments,” Ellis said.

-Gross additions for public sector and some global business customers were up 163 per cent over the same time last year, and Ellis said that Verizon also saw improved retention for those customers.

-Verizon Media’s advertising revenues were down nearly 10 per cent in March, mostly in the second half of the month, and Ellis said that the rate of decline increased in April. Some industry forecasts see a 20-30 per cent decline in digital media revenues in the second quarter, he added, and Verizon Media’s results “are likely to be similar to those experienced in the broader industry.”

-Verizon is preparing for a number of impacts to its wireless revenues. Ellis noted that the company has given customers an extra 15 gigabits of data through the end of May, which will impact the overage fees which it would normally collect. International roaming revenue has plummeted. Verizon also has about 800,000 customers , mostly in mobile, who have indicated to the company that they will be seeking relief from payment under the 60-day Keep Americans Connected Pledge, and most of that impact will come in the second quarter, he said. Ellis also said that Verizon expects its small-to-medium-sized business customers to suspend lines, which will impact revenues.

“Despite the extreme nature of what the world is experiencing, we believe that Verizon is well suited to remain resilient through this situation,” Ellis said. https://www.rcrwireless.com

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