Verizon Communications is one of the two leading national US telecoms businesses (alongside arch-rival AT&T). It was formed in 2000 from the merger of Bell Atlantic and GTE Corporation, and has strengthened its position further with other acquisitions including long-distance operator MCI in 2006 and regional mobile service at Alltel at the beginning of 2009. The group offers a full range of communications services. However its most significant business is Verizon Wireless, for many years a joint venture with UK mobile giant Vodafone. After five years as America's #1 mobile service by subscribers, Verizon's lead in this fast-consolidating sector was overturned in 2008 by the new AT&T. Verizon regained the top spot just under a year later as a result of the purchase of Alltel. The group has also pushed aggressively into the broadcast market with a huge investment in fibre-optic technology, which provides the platform for its FiOS ultra-highspeed broadband and television service. It also claims the largest 4G high-speed wireless coverage in the US. In 2013, in one of the largest deals to-date in corporate history, Verizon agreed to buy out Vodafone's 45% stake in Verizon Wireless for a whopping $130bn in cash and shares. Matching AT&T's push into satellite TV with a corresponding move into online content, the group acquired one-time internet pioneer AOL in 2015 for $4bn, followed by Yahoo in 2016 for $4.8bn.
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Adbrands Weekly Update 16th Feb 2017: Verizon's proposed acquisition of Yahoo's main content business looks set to go through after all. The two companies are finalising terms for a revised deal that takes into account the potential impact of two massive data breaches that were disclosed by Yahoo after it accepted Verizon's original offer of $4.8bn. Around $300m will be shaved from that sum to reflect the current situation, and the remaining Yahoo Inc corporate entity - which will become an investment company under the new name of Altbaba - will share with Verizon any future liabilities resulting from the hack.
Adbrands Weekly Update 2nd Feb 2017: AT&T and Verizon reported lacklustre results from their core telecoms businesses, adding fresh urgency to their push into media. Indeed, hot on the heels of their annual results came reports that Verizon has made an approach to acquire what is now the #2 cable company Charter Communications. If such a deal were to come off, the price tag could be easily in excess of $100bn. Key to Charter's attraction is its fixed broadband footprint which has already around 24m cable and broadband customers in the US, and is within reach of twice that many homes. Verizon's existing FiOS service has only 7m subscribers. The urgency of further expansion was highlighted by Verizon's annual results, with revenues and profits both down significantly. Topline slipped 4% to just under $126bn, while net income fell by more than a quarter to $13.6bn. In the main mobile business, customer numbers were up 2% to 114m, but revenues slipped almost 3% to $89m. AT&T's numbers were a little better, mainly as a result of the first full-year contribution from DirecTV. Group revenues were up 12% to $163.8bn, but a big increase in broadcast expenses dented profits, with net income down 3% to $13.3bn. Subscriber numbers for traditional video connections, broadband connections and voice connections were all down year-on-year, though the company said it has signed up 200,000 subscribers for its DirecTV Now streaming service.
Adbrands Weekly Update 12th Jan 2017: Yahoo's board is still assuming that Verizon's acquisition of its online operations will complete as expected later this quarter, and announced plans for the rump of the corporate entity once that sale takes place. Yahoo Inc would be left with two major assets, a 36% shareholding in Yahoo Japan, which is controlled by Japanese company Softbank; and a 16% stake in China's Alibaba Group. CEO Marissa Mayer and five other directors, including Yahoo co-founder David Filo, will step down as directors and the company will change its name to Altbaba, operating as a pure investment group. But could this just be wishful thinking? Only a few days earlier, Verizon EVP Marni Walden, who has been earmarked to become head of an acquired Yahoo, was asked at a conference whether the deal would in fact go through. "Unfortunately, I can't sit here today and say with confidence one way or the other," she said, "because we still don’t know. I have to have certain facts in order to be able to make a good decision. There’s a lot of stuff we don’t know.” The telecoms group is still considering the possible fallout from two mammoth hacks of Yahoo's user database, disclosed after the purchase was announced, even though they took place several years ago. It retains the option to renegotiate the previously agreed price, or even walk away altogether.
Adbrands Weekly Update 20th Oct 2016: Verizon warned that it would seek to renegotiate its agreed purchase of Yahoo or even walk away from the deal as a result of the unprecedented cyber attack on the former web pioneer, in which half a billion customers' details were stolen. Although the attack took place in 2014, it was not apparently discovered until a few weeks after Verizon agreed to buy Yahoo for $4.8bn. Inevitably, the telecoms giant finds that timing a little suspicious, and fears the data breach could constitute a material impact on Yahoo's financial performance going forward. Yahoo denies that is the case, and supported its argument with better than expected 3Q figures. Gross revenues were up 6% (though the net figure less traffic acquisition payments to partners slumped 14%) and net income more than doubled as a result of lower costs.
Adbrands Weekly Update 11th Aug 2016: Hot on the heels of its Yahoo deal, US telecoms giant Verizon is taking a step in a very different direction with the acquisition for $2.4bn of Fleetmatics, which makes tracking software for commercial truck fleets. The new move is designed to boost Verizon's presence in the fast-growing "internet of things" market. In June, Verizon agreed to acquire telematics company Telogis, also mainly working in the commercial vehicle market. Arch-rival AT&T already has an extensive presence in the passenger market, with "connected car" partnerships with Ford, GM and Jaguar Land Rover among others.
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Free for all users | see full profile for current activities: Until 1984, much of the company that subsequently became Verizon was a regional operation of AT&T, the giant US national telephone operator [see AT&T profile for more]. With a virtual monopoly of the US market since its formation in the late 19th century, regulators had become increasingly concerned with AT&T's power by the 1970s. After forcing the company to open up its network in the 1960s, a lawsuit in 1974 demanded the complete break-up of the business. AT&T disputed the demands in the courts for ten years, but eventually the regulators got their way. In 1984, "Ma Bell" gave birth to seven regional telephone operators, the so-called "Baby Bells", while Ma herself kept the long-distance network which connected them to one another.
One of the biggest of the Baby Bells was Bell Atlantic, which was granted service for seven states in the North-East, including Pennsylvania and Washington DC. It also inherited a small cellular phone business, and was quick to develop its operations in wireless communication and internet access during the 1980s. As the global telecoms industry began to deregulate during the following decade, Bell Atlantic looked to the international marketplace. It dipped a toe into New Zealand, acquiring that country's state telecoms business, and also established operations in Czechoslovakia and Mexico.
However it became increasingly apparent that the company's real sphere of interest remained the US. In 1992, the group acquired East Coast mobile phone company Metro Mobile. In an attempt to transform itself into a major power it attempted to merge with cable company TCI in 1994, but was beaten off by AT&T. Instead it formed a strategic alliance with Nynex, another of the Baby Bells, based in New York and New England. The two companies initially combined their wireless operations in 1995, before announcing a full merger in 1997. Effectively, Bell Atlantic acquired its counterpart for $25.6bn, becoming the country's #2 telecoms business behind AT&T.
Two years later, Bell Atlantic spent twice as much again to acquire rival fixed and wireless operator GTE in a $53m deal. GTE was a remarkable business by US telecoms standards, in that it had grown to the same size as the biggest of the Baby Bells without the benefit of a leg-up from AT&T. The company had started in 1916 as Associated Telephone Utilities, operating local services in Wisconsin and California in competition with the Bell System. Although it did well for itself in the 1920s without AT&T's infrastructure, ATU was unable to withstand the Great Depression at the end of that decade. It went bust in 1935, eventually restructuring as General Telephone. In the 1950s, the company added other strings to its bow, acquiring electronics firm Sylvania. In 1956 it renamed itself General Telephone and Electronics (GTE).
In the 1980s, GTE refocused on its core phone business, setting up mobile services before launching a then-massive $6.6bn takeover of regional phone company group Contel in 1991. Like Bell Atlantic, by the end of the 1990s GTE was looking for a deal that it would propel it into the upper ranks of the telecoms industry. In 1998, the company launched a bid for MCI, but was outbid by Worldcom. The merger with Bell Atlantic was a more than logical next step.
Even as the merger of Bell Atlantic and GTE was being finalised during 1999, both companies were intent on forging other deals. At the beginning of 1999, Bell Atlantic offered $45bn to acquire US West Coast mobile service Airtouch, proposing a merger of the two companies' mobile operations. However Bell was in turn outbid by British company Vodafone, which successfully clinched a deal with an offer of $60bn. Just three months later, the newly enlarged Vodafone Airtouch agreed to go ahead with the mobiles merger already proposed by Bell Atlantic. Following Vodafone's subsequent purchase of CommNet Cellular, all these various wireless operations were combined and spun off into a new entity jointly owned by Verizon and Vodafone: Verizon Wireless. Meanwhile, GTE spun off its Internet backbone business as Genuity, and sold its Canadian operation BC Telecom (acquired in 1951) to rival Telus in return for 27% in stock of the enlarged business. It also sold off its remaining electronics operations to General Dynamics for $1bn.
The new name for the combined company was chosen to echo "veritas", the Latin word suggesting certainty and reliability, and horizon, signifying forward-looking and visionary. But even as the two companies formally completed their merger, the business was hit by industrial action by almost 100,000 employees, who went on strike for better working conditions. After 18 days, terms were agreed. Ironically, this had one massive benefit - widespread press coverage of the strike made the company's unfamiliar new title a household name.
In late 2000, the group filled in holes in its US network by agreeing to acquire Price Communications, operating in the state of Georgia and northern Florida, and Onepoint Communications, which provide cable communications links to apartment blocks in 31 states (renamed Verizon Avenue). The group also agreed in late 2000 to merge its broadband services with those of competitor Northpoint Communications, paying $800m for a 55% stake. However this deal was later called off after a downturn in Northpoint's performance. (Northpoint was later acquired by AT&T).
In 2001, Verizon bought the yellow pages division of Telus for $520m, and merged it into its own Canadian directory operation to form Dominion Information Services, Canada's first nationwide print, wireless and online directory provider (sold to Bain Capital two years later). The company completed a rash of deals at the end of the year, selling off fixed lines and exchanges in lower-performing US states. Operations in Alabama and Missouri were sold to CenturyTel for $2.2bn, those in Kentucky went to AllTel for another $1.9bn. Meanwhile Verizon Wireless acquired regional wireless operator Dobson Communications for $465m. It also sold off wireless call-processing subsidiary TSI Telecommunications for around $800m. Later that year, the group's headquarters, located close to the World Trade Center in New York, were damaged in the September 11th terrorist attacks.
The group continued to dabble in the international market, where it had inherited stakes from its various component businesses. As a result of consolidation between cable TV operators in the UK during the 1990s, Verizon had ended up with shareholdings in the UK's Cable & Wireless and NTL. These, as well as a 21% shareholding in Telecom New Zealand, were sold in 2002. In 2003 Verizon sold its 39% holding in struggling Mexican wireless service Iusacell to local company Grupo Salinas for around $5m (writing off a loss of almost $1bn on the sale). Its shares in Telus of Canada and Eurotel in the Czech Republic were sold in 2004, as well as its directory publishing operations in Canada.
In Spring 2005, Verizon launched a surprise bid for MCI, breaking up talks between MCI and smaller carrier Qwest. MCI's board immediately spurned Qwest in order to accept Verizon's bid of $6.8bn in cash and stock. However a spanner was subsequently thrown into the works when Qwest revealed that its own offer, so quickly rejected, had been worth around $8bn, considerably higher than Verizon's. MCI's board responded that it considered Verizon's bid to be safer in the long-term, pointing to Qwest's precarious financial position. However the price difference sparked off protests from MCI's shareholders that they were being short-changed. There ensued a see-saw of ever higher bids. Verizon attempted to break the deadlock by negotiating a side-deal to acquire the stake held by MCI's biggest shareholder, Mexican billionaire Carlos Slim. Qwest raised the stakes again with a new offer of $9.75bn, but Verizon's response of $8.45bn sealed the deal once and for all. Qwest withdrew from the fray shortly afterwards. The merger closed in January 2006. See full profile for current activities
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