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Wed Oct 15, 2008 4:37 pm
|Ed Note: Pretty interesting article on current economics effect on broadband comm.
October 14, 2008 11:33 AM PDT
Verizon CEO optimistic despite economic crisis
Posted by Marguerite Reardon
NEW YORK--Verizon Communications CEO Ivan Seidenberg is confident that his company and much of the communications industry will make it out of the current economic crisis unscathed.
Verizon Chairman and CEO Ivan Seidenberg
(Credit: Marguerite Reardon/CNET News)
Speaking Tuesday at the Media & Money Conference, a joint production of Dow Jones and Nielsen, Seidenberg brushed aside concerns that the credit crisis and an impending recession will have a big effect on Verizon's bottom line. So far, the company hasn't seen a significant drop in subscriptions or revenue, he said.
"We expect some impact," he said. "But our view is that we will weather this."
Seidenberg's confidence is bold considering that most technology companies, even his own, have taken a beating in the stock market over the past few weeks as banks hoard cash and refuse lending to each other. But he said that the credit issues happening today will have little effect on his company or the communications industry in general. As for the broader economy, which also looks to be heading toward a recession, he is also optimistic.
The reason is simple. He believes that Verizon is in two core businesses that people will spend money on regardless of whether they are down and out financially: wireless and broadband services.
With more than 84 percent of Americans already owning a cell phone today, Verizon is still managing to sign up new customers. During the second quarter of 2008, Verizon Wireless, which is jointly owned by Vodafone and Verizon Communications, the company added 1.5 million new wireless customers for a total of 68.7 million subscribers. And because most of these customers are under a contract, Seidenberg said he doesn't anticipate heavy losses due to economic hard times. That said, he admitted that Verizon and other wireless carriers could see a slowdown in the adoption of new data services.
"(Consumers) may pull back and not buy as many premium services," he said. "But the question is will they pull back their spending on what we sell? Our view is that we will weather this. We sell the most indispensible device that consumers have, the mobile phone."
Seidenberg's upbeat outlook in the telecom market is shared by other phone company CEOs. Last week at an event in Baltimore, Sprint Nextel's CEO Dan Hesse said he also expected his company and the wireless industry in general to weather the economic storm.
"On the consumer side, wireless has become a staple," he said. "People would rather give up their TV or Internet access before they give up their cell phone. We believe we are more insulated."
Hesse said if anyone in the telecommunications market should be worried, it should be traditional phone companies like Verizon and AT&T which also sell landline phone service. He explained that as customers look at their bills, they're more likely to cut the phone cord than cancel wireless service.
But Seidenberg argued that the trend toward eliminating traditional phone lines has been occurring for the past 10 years. And because Verizon has other services that replace landlines, the company will continue to grow.
"We're already losing landlines," he said. "But as we do, we pick up wireless and broadband customers."
In fact, Seidenberg is also bullish about the prospects for Verizon's broadband business even as the economy takes a hit. He pointed out that people actually spend more time at home using their computers and watching TV during economic hard times than they do in prosperous times, which should work to Verizon's advantage.
"If people travel less, they are home more," he said. "And if they are going out to eat less, they are home more. And that's likely to mean they will spend more time on their computers or using other applications."
This reasoning makes sense in terms of helping Verizon retain the customers it has. But what about the company's future? Will customers be willing to upgrade to faster broadband speeds or more high-definition TV channels when they're losing their jobs? Or will they cut back on those services to conserve cash? Seidenberg seemed to realize the challenge.
"If the economy takes a big dip, we will see slightly lower level of growth." he said. "We don't want to be na´ve about this. We think there will be some impact. But we will be OK."
But he said even in the deepest of economic downturns, American industry will be turning to companies such as his to get the economy back on track. Companies will need to retool workers and create jobs. And he believes that Verizon could play an important role in providing the communications infrastructure to get the economy started again.
"This credit crisis will create some dislocation," he said. "But the fundamental issue for American industry is to create new jobs. If we do that, I can't imagine a company like ours won't have a role in that process."