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Financial Times, June 27, 2008 article


New king of the US wireless jungle says he is hunter, not prey

By Andrew Parker and Andrew Edgecliffe-Johnson in London

Published: June 27 2008 03:00 | Last updated: June 27 2008 03:00


Ivan Seidenberg is getting irritated. The combative chairman and chief executive of Verizon Communications bridles at suggestions that the seemingly inexorable consolidation of the telecoms industry could one day swallow up his own company.

He gets particularly irked at the idea the acquirer could be Vodafone, Verizon Communications' joint venture partner in Verizon Wireless, the US mobile operator.

"We're not for sale," he says in a rare interview with the Financial Times. "And in case you didn't get that the first time, we're not for sale. OK?"

Mr Seidenberg is brimming with self-assurance as he surveys Verizon Communications, which, with a market capitalisation of $102bn, is the second-largest US telecoms company, and the fifth-largest in the world.

He highlights the company's organic growth, noting how revenue rose 5.8 per cent on a pro forma basis in 2007. "Investors always want more, but we are in a pretty good place," he says.

Indeed. Mr Seidenberg has just pulled off a $28.1bn deal that will catapult Verizon Wireless into the top spot in the US mobile market.

By buying Alltel, the fifth- largest US wireless company, Verizon Wireless will leapfrog AT&T to become the leading mobile operator with 80m customers.

Investors warmed to Mr Seidenberg's deal, partly because it promises cost savings with a net present value of at least $9.3bn by combining the two mobile operators. Verizon Communications' shares rose 5 per cent on the day the deal was announced this month.

He shrugs off concerns that the US wireless market's growth story may be coming to an end because more than 80 per cent of the population now owns a mobile phone.

He highlights how customers' increasing use of their phones for data activities such as e-mail and web surfing is providing Verizon Wireless with a new and burgeoning revenue stream. "Machine to machine" technologies, such as heart monitors sending signals to the internet, will further increase demand for its network, he says.

Mr Seidenberg is adamant that Verizon Wireless is well placed to be one of the winners in the battle between companies for a big chunk of the revenue coming from the rising popularity of the mobile internet.

He dismisses the idea that mobile operators risk getting reduced to network pipes through which others, such as Google, provide wireless internet services.

He reserves his most acerbic remarks for Apple, the US technology company, and Steve Jobs, its chief executive.

Apple is credited with turning the mobile internet into a user-friendly reality with its much hyped iPhone, and Mr Jobs struck an exclusive network deal last year with AT&T for the handset.

While describing Apple as a "great company", Mr Seidenberg highlights its small market share of global handset sales. He scoffs at suggestions that the iPhone is about to become a mass-market handset because Apple has accepted mobile operators' pleas to subsidise it.

"There goes the conspiracy again," he says of Apple. "You're declaring them a winner before they've earned it on the field."

Mr Jobs has no monopoly on innovation, says Mr Seidenberg, whose bullishness about Verizon Wireless' future rests partly on his assertion that the mobile phone is "the most disruptive thing in business".

As handsets become banking tools and games controllers, he argues, mobile operators can up-end other companies' business models. "It's very cool. And Steve Jobs eventually will get old . . . I like our chances."

The one piece of unfinished business for Mr Seidenberg at Verizon Wireless is to fulfil his long-standing wish to have full ownership of the mobile operator.

He tried to purchase Vodafone's 45 per cent stake in 2006, but Arun Sarin, the UK company's chief executive, refused.

Mr Seidenberg denies he missed his best opportunity to finalise a deal, given Mr Sarin was then under strong pressure from some investors to sell.

"They weren't willing to sell," he says. He also insists that Verizon Communications and Vodafone have a good working relationship, although he stresses that his company has the final say on operational matters at Verizon Wireless.

"We've given them the best return they can get any place on the planet," he says, alluding to how analysts estimate the value of Vodafone's 45 per cent stake in Verizon Wireless has risen to $60bn.

While Verizon Wireless goes from strength to strength, Verizon Communications' fixed-line telecoms business is a work in progress.

It is spending $23bn on a high-speed, fibre optic network that extends all the way to customers' homes to offer download speeds of up to 50 megabits a second.

Verizon is also rolling out a television service known as FiOS TV, which runs over the network. Three years after its launch, it has 1.2m customers, and is going head-to-head with cable operators as well as AT&T's U-verse TV service.

The capital spending bill on the FiOS network alarmed some investors, and for a while served as a drag on Verizon's stock. Mr Seidenberg, in his one admission of regret during the interview, says he should have found a way of "driving more value" back to investors.

In the short term, Mr Seidenberg says any dealmaking by Verizon is likely to be focused on beefing up its telecoms service to multinationals. He describes Verizon Business as the "insurgent", going up against the likes of AT&T and BT of the UK.

However, Mr Seidenberg does not rule out the idea of Verizon one day running mobile businesses for consumers outside the US.

Asked whether he could even contemplate a bid for Vodafone, he replies: "How could you not? Every banker that shows up looks at it, but I have not seen any compelling case."

Vodafone briefly considered the case for buying Verizon Communications last year, but Mr Seidenberg is dismissive of the idea that his company could be a target.

"In the long term, my view is that we're the hunter. That's the way I see it, and I'm trying to develop a new generation of hunters."




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