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TECHNOLOGY | Q & A

Telecom Finds Its Calling

Verizon chief wants to expand the old-fashioned way--slowly and with caution

June 24, 2002|ELIZABETH DOUGLASS | TIMES STAFF WRITER

In today's brutally humbled telecommunications industry, it's all about the basics. Upstarts with brash-talking executives are out. Conquering the world is out. And chief executives these days can forget about rapid expansion, frenzied acquisitions and highflying stock prices.

In times like these, it's good to be Verizon Communications Inc. The New York company may be suffering from a multitude of setbacks, but it has steady cash from monthly phone bills, a dominant market position and enviable financial strength--all of which put Verizon a class above its troubled and bankrupt brethren.

Verizon is the nation's largest local phone company, with copper wires stretching into one-third of U.S. households and into the headquarters of more than a third of Fortune 500 companies. Verizon Wireless, the company's joint venture with Vodafone Group, has more than 29 million subscribers and is the nation's largest wireless carrier.

Lately, Verizon has taken aim at the long-distance market, where it ranks fourth in size behind Sprint Corp. Once the company wins regulatory approval to sell long-distance service in a few more states, it is likely to move up to No. 3. Last week, Verizon teamed up with software giant Microsoft Corp. in a potentially lucrative effort to promote Microsoft's MSN Internet service and high-speed Internet connections from Verizon.

At the company's helm is President and CEO Ivan Seidenberg, 55, who helped build Verizon through a series of mergers that combined local phone companies Nynex Corp, Bell Atlantic Corp. and GTE Corp.

His company speaks loudly in the market, in Congress, in the courts and in the halls of the Federal Communications Commission. The man behind those moves is surprisingly low-key, even soft-spoken. In a recent interview, Seidenberg shared his views on the MSN deal, corporate trust, wireless consolidation, government regulation, expansion in California, cheap telecom assets and his plan to grow Verizon the old-fashioned way--carefully and gradually.

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Question: Why do you need a combination with MSN?

Answer: This deal offers an opportunity to accelerate [broadband] growth because what we bring is a network orientation and Internet service capabilities. What Microsoft brings is the extraordinary capability to develop software that can enhance the broadband experience. So I think we really do have a pretty simple case here where the two companies, if we both stick to what we do well, will bring a compelling product to the customer.

Q: What are your thoughts on the accounting and other corporate issues in the news now?

A: First of all, as a corporate executive, I think we have to take some responsibility for recognizing there has been a breach of the public trust, which is manifested in the way the market is treating everybody right now.

There's got to be a little dose of improvements in corporate governance. Secondly, I think that the enforcement that exists within the law needs to be administered so that we're not writing new rules and avoiding the most obvious thing to do, which is to enforce the ones we have.

Q: What about excessive executive compensation?

A: I think that in our case, we have to demonstrate that our pay is consistent with the delivery of value.

When we get to January and to the next round of executive compensation issues, I really believe you'll see corporations step up to the plate and try to make proposals that put compensation more in line with where the market is.

We're going to be creative and we're going to be focused on making sure that we address the concerns. It's pay, it's accounting, it's governance. Every day, a company has to get up and dedicate itself to executing to a high standard in a way that's transparent. And you only rebuild trust over time. It doesn't happen overnight.

Q: With all the telecom bankruptcies, there are a lot of assets--and some whole companies--available for pennies on the dollar. Is Verizon interested?

A: Getting distressed assets at a bargain-basement price, and having that business have no customers or revenue, or no plan for growth ... that is not helping. You get to say you have bigger reach, you have more inventory, but you have a bigger company with slower growth.

Q: Don't you need overseas fiber-optic networks, like those available from KPNQwest or Global Crossing Ltd., to serve multinational corporations?

A: We view ourselves as a company that has a great big offensive and defensive line. We're big. We average 300 pounds. We have a great running game. We can grind it out. We're good on the fundamentals. So we want to take the business market we serve today, which is basically domestic U.S. customers, and really focus on exploiting our opportunities there, and then migrating up to the multinational companies.

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