Vestberg discusses adapting to changes in consumer behavior itself, noting Verizon's prepaid business segment has struggled and faces disruptions from most customers' preference for postpaid plans. Additionally, he says the overall U.S. consumer market "is shrinking" as people curb spending. Offers that previously worked, like new phones for all, are less effective lately, Vestberg says. With consumers growing more cautious, he explains that "you need to see that you have the right offering for every customer in every consumer segment."
Despite high inflation, the Verizon chief executive says consumers in the U.S. have not yet felt the full effects on their finances, similar to Verizon's own financials. He attributes this partially to Verizon's business model and strategy. While elevated interest rates are putting pressure on many companies and households, Vestberg states that Verizon's network infrastructure is built to consistently generate revenue, "but it's not because of economy, it's more about the nature of how we have built the network."
Furthermore, Vestberg stresses to Yahoo Finance that strong leadership is most vital to business success. He grades his own mood daily on a 1-10 scale to stay in an optimal range for leading since 2009. He confesses that his "sweet spot" is 3-8, enabling him to positively guide employees and stakeholders. Vestberg says his 2024 leadership goal is getting his team in "harmony" to propel Verizon forward. He aims to foster an environment where talent thrives by utilizing company assets optimally.
BRIAN SOZZI: So Hans, it's good to see you.
HANS VESTBERG: V Teamers, that's the people working at Verizon, correct.
Everybody else that want to be a V Teamer can be a team, so that's OK. BRIAN SOZZI: All right, fair enough.
It's good to see you here.
And I think one of the things we're really going to be trying to get to the bottom here at Yahoo Finance Invest is what are leaders up against not only right now, but for next year?
As someone leading Verizon, what are some of the biggest challenges on your plate now that the year is almost over?
HANS VESTBERG: If you look at the outlook-- and I think, that first of all, I think, the last five years has proven to be very uncertain, a lot of things that you didn't expect.
So I think that leaders need to have a balance between being in the front line sometimes and sometimes you stay back.
And I think that comes up and down depending on what's happening and you need to be prepared for it.
And just think through the last five years with everything that's happened with the wars we've seen, with the COVID, and all of that, that, of course, putting an impact on any corporation.
And of course, we are one of the biggest direct-to-consumer businesses in the United States.
It's clear that you need to be very different.
I became CEO the first time in 2009 for a public company.
It's very different to be a CEO of a large public company today than it was 2009.
But it's all about having a diverse set of people around you that sees things a little bit different.
I'm born in a northern part of Sweden and there are a few that are in Verizon that comes from the northern part.
So you need diversity of other people with other experiences.
And then, of course, seeing that you think about all the stakeholders you have at the same time because we are living in a time when you need to think about a stake.
Cause, of course, shareholders are super important for us.
Customers ultimately pay the bills.
You need to think about them, how they are change, and they have changed quite dramatically.
BRIAN SOZZI: I promise I'm paying my bills, Hans.
I promise you.
I'm still making the payments.
HANS VESTBERG: You're one of many doing really good payments to Verizon.
And then, of course, the employees that are doing an outstanding job.
And finally, we are in every zip code in this country with infrastructure.
We are in the local community.
See that that hangs together.
When you have crises, when things are happening, it's important.
So when I look into next year, I mean, everyone that is an expert always tells me, there's two quarters left, it's going to be a economical crisis.
That has now been ongoing for quite a while.
And the only thing I can say, I came out my third quarter earnings for a couple of weeks ago.
We have the biggest consumer business in the country on telecommunication and probably direct to consumer, and so far, we haven't seen any payment issues.
Clearly, our consumers still continue to pay or pay the bills very well.
We have the same, sort of, bad debt as we had one year ago, two years ago basically.
So we probably have a little bit more high-quality consumers in our base, but in general we haven't seen anything yet.
And I see everything, and I read everything, and I follow everything, but so far nothing.
So you need to be prepared.
BRIAN SOZZI: When you look at the-- you also have a prepaid business.
HANS VESTBERG: Yeah.
BRIAN SOZZI: Now, the prepaid business, the volumes have been under a little bit of pressure.
What does that tell you about the state of the consumer in this?
HANS VESTBERG: Actually, tells you the opposite.
So we have both the postpaid business and we have a prepaid business.
We have roughly 20 million consumers in the prepaid business.
That business has been shrinking and the main reason is that many prepaid customer has become postpaid on wireless.
So they actually stepped up because some of the offerings.
And I think that was happening in 2022 and we had some challenges.
I wasn't really happy with our performance in '22.
We saw a, sort of, a leakage from postpaid down to prepaid.
So the prices on the lowest postpaid plans were basically equal or almost better than prepaid, so we saw a churn going upwards.
And we were not part of that because we didn't have that possibility.
So I think that's what we're seeing more.
So that has been a pressure on the prepaid business has been much more that the step up to postpaid has happened in the market.
But overall, if you take the overall, wireless consumer market in the United States is shrinking.
It's less and less people.
I mean, more and more children has a phone old people has phones people like me or BRIAN SOZZI: Do you think people are just taking better care of their phones?
Is that delaying the upgrade cycle?
HANS VESTBERG: No, no, it's not.
I think it's two things, but it's a little bit less upgrades.
First of all, I think when you come to a mature market, we are very financially disciplined.
Seeing that we have the right offer in front of the customers, historically, the way to grow our business was to give a new phone for anyone.
That model doesn't work when you are in a saturated market.
You need to see that you have the right offering for every customer in every consumer segment, that's one.
So I think that we actually consciously have decided to do less promotions.
It was very promotion high in 2021 and '22 because 5G came out and everybody, now we're going to capture new subscribers.
That's less of that.
Then, of course, we have also seen that the phones and they are more built on the software than the hardware, meaning you can keep a phone for much longer because it has the same performance as previous cycles.
That is also bringing down a little bit the upgrade cycle.
But all in all, it's very natural when you are within a mature 5G market.
BRIAN SOZZI: How would you grade the current upgrade cycle?
Are you happy with how the iPhone has done?
HANS VESTBERG: I think we are very happy how they performed for us.
We continue to have very strong gross adds, new customers coming in in this cycle both on the business side and the consumer side.
So a fairly normal year for the iPhone 15 compared-- you know, there's been a year like iPhone 12, which was the first 5G phone, which was a rocket.
I think this is just a normal year.
Many people or consumers being on iPhone 11, 12 has come up to 15.
The one sitting on 14 and 13 probably not moving.
And then you have the, sort of, people that always want a new phone regardless of, which also, of course, doing it.
But mainly-- BRIAN SOZZI: You always get the new phone, right?
HANS VESTBERG: For some reason I do that.
I'm not sure why, but, of course it's part of my job to test all the equipment, both infrastructure and the phones.
BRIAN SOZZI: Verizon, of course, is concentrated in the US, but you, Hans, are very much a world leader.
You have that really world view.
HANS VESTBERG: Yeah.
BRIAN SOZZI: When you travel around the world what is the impact you're seeing from higher interest rates mostly out of the US?
HANS VESTBERG: So it's a little bit different.
I mean, it depends on how much-- in different countries how much the interest rates are hitting ultimately consumers.
I mean, in the US, it's still so that much of the interest hike has not gone to the home owners because given how it is.
In markets like in Europe, like Spain it's enormous impact because basically in the increased interest rates that passed almost immediately to the consumer.
So then you see a slowdown much quicker than we see here because normally you would think about with all these interest rates going up.
We would see a slowdown very quickly in the US, but we don't see it.
And the reason is, of course, that not all that interest increase is going straight to consumers.
It hits the ones that have variable interest rates, which corporation might have and things like that.
So I see much more tougher in especially Europe.
And then we see the part of Asia continuing being very strong because they have still a growth potential where when you grow very fast, then you can actually manage the interest rates in a better way.
BRIAN SOZZI: The rates at these levels, does it hinder how fast Verizon can grow next year?
HANS VESTBERG: No, it doesn't.
I think that we have owners economics on everything we have.
Basically, we own all our infrastructure, et cetera.
So for us, it's basically, you think about it, we build one network and then we want to have as many revenue-generating activities on top of the network.
So it's a leveraged model.
So the more I can do with the network, the more revenues I can get.
And then I have a scalable model where I have the best return on investment in the industry.
So that's the whole idea for us, so it doesn't change.
My CapEx in '22 was almost $24 billion.
This year I have my guidance between $18.25 to $19.25.
I'm going to end up in a higher range, meaning closer to $19 billion.
So we still invest heavily in our business.
And next year we have talked about our business as usual coming back now after a spike in five years around $17 to $17 and a half billion in CapEx every year, which still is a sizable amount.
But it's not because of economy, it's more about the nature of how we have built the network and where we are in the buildout.
BRIAN SOZZI: Hans, before I came on here, I went to the new Yahoo Finance launch today, amazing new platform.
And I went to your stats page and I was-- look, I was surprised to see Verizon stock yielding 7 and 1/2%.
I'm listening to you talking about the consumer continues to be doing pretty well.
I know you're cutting billions of dollars of costs.
What's the market missing here?
HANS VESTBERG: I think that-- first of all, part of '22, we didn't perform perfect.
I mean, we are the leader.
We are the number one in the market.
The expectation on me and my team is that we are so much better than anybody else.
We had a little bit challenging first half year.
We didn't do really well on consumer.
We did a lot of changes in the company.
Basically, I changed almost the whole management team here in the beginning-- in April.
We start to be much more segmented in our consumer business.
Now, I've seen the traction in the last two quarters, they're really good.
On broadband, we do great.
We have done-- we do more than 400,000 new broadband customers every quarter right now.
We are positive on net adds on wireless in this third quarter.
Cash flow, we increased our cash flow projection for the year to 18-- billion plus.
So a lot of things are going in the right direction.
So we think we had a dip there and then, of course, the whole telecom industry has come down, especially on the multiples.
So I think that's why we are on a very high yield.
And secondly, interest rate is playing a game for us as well because many of our retail consumers, of course, seeing us more sometimes as a bond given that we have increased our dividend for 17 consecutive years.
We're a really good dividend-yielding company.
So of course, when interest rates come up, it's a trade off.
So I think those are playing in, partly our own performance, which is going in absolutely the right direction right now.
And then the market, the financial market with a high interest rate is impacting it.
But I would say it's a hell of a good deal.
BRIAN SOZZI: All right, fair enough.
I want to leave a good amount of time here-- HANS VESTBERG: 7 and 1/2%-- BRIAN SOZZI: That's not bad.
Look what treasuries are.
HANS VESTBERG: Where did you get 7 and 1/2% before?
You can say it's a denominator that is low, but it's still a good yield.
BRIAN SOZZI: I want to leave a good amount of time because a lot has been made recently about how you approach leadership on how you grade.
For those not familiar, walk us through this because it sounds like you've been doing this for a while.
How do you lead and how do you judge yourself on a daily basis?
HANS VESTBERG: OK, it started actually very early in my career to start focusing on what I'm really good at and then seeing that I have people that are really good on what I'm bad at.
And my list of good is fairly short and the list of what I'm not good at is really long.
But one thing that I think I'm good at and you have actually been a V Teamers, you know it.
I think I give energy and I'm good leading big organization.
And that means that I need to have energy, I need to be motivated.
So I started 2009 to grade myself every morning the day after from a scale 0 to 10.
And if I'm between 0 to 2, I'm usually in bad mood.
I have a shit day, you know.
I shouldn't be around people.
BRIAN SOZZI: Tell me you're a seven right now.
HANS VESTBERG: Yeah, I'm going to tell you soon.
BRIAN SOZZI: OK. HANS VESTBERG: And I should not be on a stage here because it might be the only time my investors see me, or my customers, or whatever.
I should be between three, maybe eight, that's my sweet spot.
And I bring out my best leadership skills in order to see that I do the best for Verizon every day.
I usually say I find me between 9 and 10.
I have too much energy, so people can be a little bit tired of me.
[LAUGHTER] So I have been doing this since 2009.
So I've graded myself every day since 2009, but it's just a way for me to see that I give the best I can to my shareholders and to my stakeholders every day.
I know I'm here.
It's an enormous platform I have an enormous responsibility.
If I can improve myself every day, I have to.
So that's why I'm doing it.
BRIAN SOZZI: What areas are you looking to improve on as a leader next year?
HANS VESTBERG: Oh, that's a good question.
I think that, for me, the most important is to see that I get my team in harmony, they have the right, sort of, circumstances around them to execute well.
I think what I put in place right now, I'm really happy with the assets we have all the way from infrastructure or things we have acquired, the things we have divested.
I think we are in a really good place with assets.
I think that's what I've given my team.
And now we need to work together to see that we leverage that for our shareholders the next couple of years here.
But we have a very clear path what we want to do.
We have a clear capital allocation strategy in order to see that we both can invest in our business, but also please our shareholders.
So I think the team has those.
And my job the next year is to see that the team really are using those assets to the best.
BRIAN SOZZI: You mentioned that you changed the management team.
How difficult is it to do that as a leader?
HANS VESTBERG: It's part of life.
No, I think that sometimes you feel-- I mean, I think I'm into my sixth year putting a team from the beginning and then suddenly many of them, they wanted to leave.
There were some exits that I wanted and we did that in one way instead of the piecemeal organization with new leaders every quarter.
I said, let's do it all at once.
It's worked extremely well.
I moved people inside, which I think is one of the best you can do.
I took the head of business to be the head of consumer.
I took my head of networks being head of business and you see how good they are when they have diversity and view of the whole business.
And they know all the other functions.
So they were very quick into the business, very quick to execute.
So I'm really looking forward to continue to execute with that team.
BRIAN SOZZI: And lastly, Hans, when is 6G coming?
No, that was off script.
That was just-- HANS VESTBERG: No, no, no, I know that there was a lot of off script here actually.
That doesn't matter, I'm fine.
6G, I think that right now I don't think it's maybe early '30s.
The design principle is just happening, but I don't think that you will see and have 6G in the phone in your hand until 2032 or something like that.
BRIAN SOZZI: Wow, that is fascinating.
Hans, it's good to see you again.
Really., really, no stranger to Yahoo Finance.
Verizon Chairman and CEO Hans Vestberg, give it up to him.
[APPLAUSE] Appreciate it.
Hans, so good to see you.
I appreciate it.
Thank you so much.
HANS VESTBERG: Thank you.
