Lowell McAdam is stepping down as CEO of Verizon Communications on Aug. 1, to be replaced by former Ericsson chief exec Hans Vestberg, the telco announced Friday.
McAdam, 64, will serve as executive chairman of the board through his retirement from Verizon at the end of the year, at which time he will become non-executive chairman. His exit has been widely expected on Wall Street, but the company hadn’t provided a clear picture of the succession plan.
Now Verizon’s board has made its choice: Vestberg, 52, who joined the company a little over a year ago as CTO and EVP/president of global networks. Vestberg (pictured above) previously served as Ericsson’s president and CEO for six years.
“For Verizon, the time for a change in leadership is now, and I am confident that Hans is the right person to bring Verizon through its next chapter,” McAdam said in a statement, calling Vestberg “an energizing force” at the company.
Vestberg, a native of Sweden, had spent virtually his entire career at Ericsson. After joining the telecommunications-equipment maker in 1991, he was named CFO in 2007 and then CEO in 2009. Ericsson ousted Vestberg in July 2016 after the company missed financial targets several quarters in a row.
The changeover comes as Verizon’s rivals in the wireless and telecom space are engaged in transformational M&A deals. AT&T is trying to swallow Time Warner, with a ruling expected June 12 in the DOJ’s lawsuit to block the acquisition. Meanwhile, after years of back-and-forth, T-Mobile and Sprint announced an agreement to merge.
McAdam has been loath to pull the trigger on a big M&A play, with Verizon instead making relatively smaller deals for internet media players AOL (for $4.4 billion) and Yahoo ($4.5 billion). By picking Vestberg to lead Verizon, the board is signaling the focus will continue to be investing in wireless networks and technology — specifically, building out a nationwide 5G broadband network — rather than media.
“Despite Mr. Vestberg’s short tenure thus far at [Verizon], we believe the decision to make him the successor to McAdam makes sense given Vestberg likely has the best vision among executives ahead of a massive 5G inflection,” CFRA Research analyst Angelo Zino wrote in a note. He maintained a “hold” recommendation on the stock.
McAdam is set to give up his role as Verizon’s CEO exactly seven years after he was named to the job on Aug. 1, 2011. He was previously Verizon’s president and COO, overseeing wireline and wireless operations, and before that was CEO of Verizon Wireless from 2007 until 2010 (which he joined in 2000). Earlier in his career he worked for cellular carriers PrimeCo and AirTouch Communications and held management roles at Pacific Bell.
[UPDATE: Just hours after naming Vestberg to the CEO role, Verizon announced that EVP of global operations John Stratton is stepping down from his role immediately, serving as an adviser to McAdam before leaving at the company at the end of 2018.]
With his appointment as Verizon CEO, Vestberg’s base salary will increase to $1.5 million (up from $807,497 in 2017), according to a regulatory filing. The exec’s target short-term incentive opportunity will increase from 150% to 250% of base salary, and his target long-term incentive opportunity will increase from 600% to 800% of base salary. Vestberg also will get a one-time stock grant worth about $10 million as of Aug. 1, 2018, when the CEO switch takes effect.
Read McAdam’s memo to Verizon employees about the CEO transition:
I have something I’d like to share with you. I’ve been with our company and its predecessors for 35 years, and your Chairman and CEO for the past seven. Today, marks the beginning of an important series of events for Verizon. We are announcing that Hans Vestberg will succeed me as the Chief Executive Officer on August 1st. I will serve as Executive Chairman of the Board through the end of the year, and then continue as Chairman of the Board in a non-Executive capacity starting in 2019.
This is an exciting period for Verizon, and I believe there is no better time for this transition than now. It is my pleasure to hand the reins over to Hans. Hans is a recognized executive in the telecommunications and technology industries, and since joining Verizon in early 2017 he has demonstrated his ability to innovate and execute. I know that he has the right expertise, experience and business acumen to lead us forward and build on our strategy. Importantly, Hans is an inspiring leader, with high energy and a passion for delivering on the core values that truly make Verizon the world leader it is today.
When I look back at the milestones throughout my career, the one that stands out most is Verizon’s transformation into a world-class technology company. Today, Verizon is one of the world’s leading providers of communications, information and entertainment products and services to consumers, businesses and governmental agencies. Our goal has always been to improve lives through innovation. As I think about the power of 5G, I am convinced that this is a significant and pivotal time for Verizon and our entire industry – and now is the time to bring Verizon into its next chapter.
It has truly been a pleasure and a privilege to lead this great company. I am incredibly proud of what we have accomplished together. I look forward to continuing to play a part in its future as Executive Chairman of the Board, and I have tremendous confidence in where Verizon is headed with your support and Hans’s leadership.
Thank you for your dedication to Verizon. And never forget, there’s always a higher gear.