Top execs from Verizon Wireless, AT&T Wireless Services Inc. and Nextel Communications Inc. made appearances at this week’s Lehman Brothers conference in New York to discuss their current and future business plans and financial performances.
Verizon Wireless’ Chief Executive Officer Denny Strigl attributed the No. 1 carrier’s success to its business model of providing strong fundamentals via disciplined execution to see consistent results. He also attributed the carrier’s consistent results to its focus on a quality customer base, which according to Strigl, goes hand in hand with profitability growth.
Strigl expects voice to remain “king,” but at a slowing rate as 2.5-generation and third-generation networks are rolled out.
Verizon, with Vodafone Group plc, plans to launch its GSM/CDMA-equipped World Phone later this year as well as a “user-friendly” multimedia messaging service camera-phone offering. The company is “very pleased” with its Get It Now data service thus far, he added.
John Zeglis, CEO of AT&T Wireless, said the company is focused on financials: achieving free cash flow and profitable revenue growth along with enlarging its margins. “The worth of any enterprise in the present value of its future cash flows,” Zeglis said. He expects AT&T Wireless will achieve positive free cash flow this year, one year ahead of previous expectations. Zeglis noted that in the company’s history, each time free cash flow draws near, an expensive upgrade or addition to the network drives it back down.
To that end, the company plans to keep a capital expenditure-to-revenue ratio of 20 percent or less in coming years, meaning it will spend no more than 20 percent of its revenue on investments.
Zeglis believes new business models will need to be in place to continue an upward trend in free cash flow and counts the recently launched prepaid GoPhone as a step in the right direction. “Two weeks in, we’re right where we want to be,” he said. Data services also present opportunities to change the business model, which has become obvious to AT&T Wireless in its successful American Idol text-messaging campaign.
Nextel CEO Tim Donahue reinforced his company’s focus on differentiation in the marketplace, focusing on Nextel’s Direct Connect Push-to-Talk offering, which will be offered nationwide by August, and will be a global offering in the future. “The success of competitors’ push-to-talk offerings will be inhibited in the marketplace,” said Donahue, adding that similar offerings expected from Verizon and Sprint PCS will not compete with Nextel’s service.
The carrier is focused on high-value customers, targeting those in the public-safety and government segment, as well as its “bread and butter customers” in the general business segment.
Nextel further differentiates itself from the competition in that it is likely to spend money this year, predicting capital expenditures of up to $1.8 billion to add coverage sites. “We’re going to be putting up a lot more coverage sites because we have the wherewithal to do it,” Donahue said.
