Friday, September 24, 2010

Verizon Picks McAdam to Lead in Era of Apple, Google


In 2008, Lowell McAdam, head of Verizon Wireless, introduced an unlimited wireless calling plan for $99.99 a month that sparked investor concerns he was starting a price war.

The company argued the plan would boost revenue over time as customers used their mobile phones more, and AT&T Inc. and T- Mobile USA Inc. matched the move within hours. McAdam, who this week was named Verizon Communications Inc.’s chief operating officer and heir apparent, had a clear vision for the future that has helped his company succeed, said Larry Babbio, a former president of Verizon Communications, co-owner of Verizon Wireless with Vodafone Group Plc.

“He understood the business not just intellectually, but intuitively,” Babbio, now a senior adviser at Warburg Pincus in New York, said in an interview. “Lowell was able to create a vision for the entire company, and then he was able to execute in every element of the business.”

His skills helped McAdam, 56, build Verizon Wireless into the biggest wireless business in the U.S. Now McAdam, who started his private-sector career in 1983 as the old Ma Bell was being broken into pieces, will need those skills to help Verizon succeed in an industry being remade by Apple Inc. and Google Inc.

“It’s a changing landscape,” Blair Levin, a fellow at the Aspen Institute in Washington, said in an interview. “There’s a whole new set of issues, new rules of the road.”

McAdam’s Sept. 20 promotion puts him in line to succeed Chief Executive Officer Ivan Seidenberg, who is expected to retire by his 65th birthday in December 2011. McAdam and Seidenberg declined to comment through spokesman Marquett Smith.

Verizon’s Struggles

The appointment comes as Verizon is struggling with the loss of traditional telephone customers. Though the company has come to rely increasingly on Verizon Wireless, the largest wireless business in the U.S., for revenue growth, that growth is slowing as more people get mobile phones. Verizon’s sales may shrink in 2010 for the first time in five years, according to the estimates of analysts surveyed by Bloomberg.

Companies such as Verizon need to figure out new approaches to business, Levin said. The challenge, he said, is that a company like Google is both partner and rival. Google markets mobile applications that compete with Verizon’s products, even as Android phones operate on Verizon Wireless.

McAdam will have to be ready to capitalize on the opportunities for cooperation, while competing where needed, Levin said.

“His leadership qualities have been pretty clear from my dealings with him,” said Levin, who crafted the U.S. broadband plan with telecom and Internet companies while he worked at the Federal Communications Commission. “An important part of that is political leadership.”

McAdam’s Early Years

McAdam grew up in upstate New York. His family owned a farm machinery business and McAdam would fiddle with welding and machining tools, while his father ran the shop, according to an interview McAdam did last year with the University of San Diego.

He got his MBA from USD after receiving a bachelor’s degree in engineering at Cornell University. In between the two schools, he was an engineer in the U.S. Navy, serving in San Diego and Okinawa, according to an interview with a veterans’ publication.

McAdam is still a tinkerer. In his spare time, he restores old cars, particularly 1970s-era muscle cars. One recent project was fixing up one car built as a pacer for the 1969 Indianapolis 500, according to the USD video.

“He has a well-documented love of cars, and he restores classic cars,” said David Pyke, dean of the San Diego business school, where McAdam graduated in 1983. “Some people do their roses, and he’s in his workshop making really old, ugly looking cars look fabulous.”

Fine-Tuning Verizon

McAdam has been fine-tuning Verizon Wireless ever since he took over at the beginning of 2007. He helped engineer the acquisition of Alltel Corp., which allowed the company surpass AT&T as the largest wireless company in the U.S.

He has also championed the Android smartphones made by Motorola Inc. and HTC Corp., helping the company compete against AT&T, the exclusive carrier for the iPhone in the U.S. Android phones outsold the iPhone and the BlackBerry from Research In Motion Ltd. in the U.S. in the second quarter, according to researcher Gartner Inc.

McAdam has also led the push toward fourth-generation wireless technology, called long-term evolution. The technology will debut later this year with speeds similar to what customers get on fixed broadband connections at home. To promote the new service, McAdam oversaw the creation of labs for building LTE products, as well as a $1.3 billion venture capital fund.

Succession Planning

Verizon Communications rose 7 cents to $32.39 in New York Stock Exchange composite trading at 4 p.m. The shares have increased 4.6 percent this year.

Babbio said that Seidenberg, who has been Verizon’s only CEO since it was created in 2000, has been planning for his retirement for years. Six or eight years ago, Verizon’s management chose a handful of potential successors and put them in roles that would illustrate their abilities, he said.

McAdam’s work since then has convinced Seidenberg he’s the right person to lead Verizon as it faces such dramatic change, Babbio said.

“Your primary job as a manager is to leave this company in the hands of somebody that is better than you are,” Babbio said. “I don’t think Ivan’s ashamed to say that he’s going to leave the company in the hands of someone better than he is.”