The company’s Independent Lead Director will assume the position immediately. He was CEO of PayPal from 2015-2023, and also has considerable experience of senior leadership within the telecoms industry.
Outgoing CEO Hans Vestberg will stay with the business until October 2026 to help with the transition.
Verizon reiterated its 2025 guidance., which points to wireless service revenue growth of 2.0-2.8% and underlying cash profit growth of 2.5-3.5%.
The shares fell 1.8% in early trading.
Our view
Verizon’s CEO change comes as a shock. This was not a telegraphed move, though fears of a sharp shift in management have been tempered by news that the departing Hans Vestberg will remain as an adviser.
Dan Schulman brings telecom experience but is better known for his mixed track record at PayPal. His early focus on gaining market share sounds promising, though aggressive pricing could hurt industry profits. We'll be watching closely for more detail on his strategy.
Verizon had a decent quarter back in July, but price hikes were a key contributor. That’s a short-term financial boost, but the longer-term impact on customer growth is a little worrying.
Consumer is by far the larger of its two primary segments. It provides mobile and landline services directly to individuals and wholesalers, as well as selling devices like smartphones and laptops. Mobile subscriber growth, or lack of, is the key concern. Higher prices are helping prop up the top-line, but intense competition means customers are switching at an increasing rate.
Recovery efforts include bundles, locked-in prices, perks, and better service via AI and 24/7 access. This all makes sense, but competition is using the same strategy, so we’ll have to see if it yields the intended results.
There's plenty of scope to grow with increased 5G adoption, through traditional mobile and fixed wireless broadband products. Verizon's putting a lot of eggs in this basket and has thrown billions at the task. We think this is the right move. Growth in this space is picking up nicely but it’s still only a small part of the overall picture.
Wireless data is a notoriously competitive market. The same can be said of traditional broadband offerings. It's hard to offer something meaningfully unique, so telecoms groups often end up competing mainly on price, which is rarely a good thing for profit margins.
Verizon's debt pile is eye-watering and the chequebook’s got more work to do too, with the proposed $20bn acquisition of Frontier Communications. Integrating Frontier’s infrastructure into its own network could also help accelerate its fibre buildout.
For now, the 6.3% forward dividend yield looks well covered, as easing capex plus some more favourable tax conditions mean free cash flow is looking strong.
The valuation looks about right, and strong cash flows with a healthy yield are attractive. But we would urge caution. While the use of debt has helped boost returns for equity holders, it can be a double-edged sword if profits struggle.
Environmental, social and governance (ESG) risk
The telecom industry is low/medium in terms of ESG risk. Data privacy and security is the most significant risk driver, not only because customers are increasingly concerned about privacy, but also because cybersecurity breaches can be costly. Product quality is another key risk, particularly given the networks they manage are considered critical infrastructure. Carbon emissions, human capital and business ethics are also risks worth monitoring.
Verizon’s overall management of material ESG issues is strong.
Verizon has officers responsible for security and privacy, and its cybersecurity centre meets international standards. Climate risks are reported, and it conducts annual impact assessments. The company offers employee development programs, including tuition assistance, and ensures equal pay for women and men.
Verizon key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.