Insights | By Howard Tiersky

Should Verizon Be Your Role Model?

Recently, Verizon announced its acquisition of internet behemoth Yahoo!, at a price of $4.8 billion. This is on top of last year’s $4.4B acquisition of similarly beleaguered AOL. What are we to make of this move, and what can we learn from it?

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Many of our clients are companies whose value proposition was formed in a pre-internet era. They have websites and mobile apps but are struggling to transform themselves for a digital age. Our clients often ask, “Who is doing it right? Beyond Facebook, Google and Amazon, Which ‘legacy’, pre-digital companies have really made a successful transition and can be looked to as a role model?”

I think Verizon is a company we can all look to as a role model for bold digital investment and excellence in execution. It has thrived in a wildly changing industry – telecommunications -- while continually re-inventing itself with digital at the center. Where did Verizon come from?

Verizon was born in 1984 as ‘Bell Atlantic,' when the U.S. Department of Justice split up the AT&T monopoly into the seven Regional Bell Operating Companies, aka ‘Baby Bells.’ Their footprint included New Jersey and Virginia, and their business was primarily land-line communication for businesses and homes.

The 80’s and early 90’s were still a good era for landline communication, and Bell Atlantic eventually acquired Nynex, a sibling Baby Bell focused on the New York market. As good as the land-line business was in the 80’s and early 90’s however, can you imagine what would have happened if they’d focused on that business into present day? Verizon realized that wireless communications was a key to the future, and in 2000, Bell Atlantic acquired a leading wireless carrier, GTE.

At the time, GTE boasted 23 million wireless subscribers, a lot for the time, and they rebranded the new company: Verizon. At the same time, they made a deal with British mobile company Vodaphone to fold in more subscribers and drive additional investment in wireless infrastructure and that market continued to grow.

A few years later, in the shadow of the dot-com crash, Verizon spent billions to launch their pioneering FIOS fiber-optic services to provide broadband internet. Then, several years after that, they boldly moved into a completely new industry by launching FIOS TV, a cable television competitor, taking advantage of the massive bandwidth provided by their fiber infrastructure.

In 2007, Verizon made another bold move and bid almost $10B in the FCC’s auction of 700mhz spectrum, giving them a massive additional advantage in wireless, and they’ve made other key acquisitions, such as MCI and Terremark.

More recently, Verizon has divested itself of much of its traditional “wireline” business to focus on their digital telecommunication offerings.

Of course, Verizon has faced its own challenges along the way, including major labor strikes, numerous lawsuits, penalties for FCC violations, management scandals and political battles over topics like net neutrality. But for a company that started in a business that has shrunk substantially over the last several decades, Verizon is a company that has successfully identified new areas of value, made bold investments and had the operational effectiveness to bring them to market successfully.

So will Verizon’s recent acquisitions in the content space of AOL and Yahoo be successful? I don’t have any insider knowledge, but Verizon is a company with a fantastic track record of future-thinking bold moves, and my money is on them.