Verizon to cut about 15,000 jobs as new CEO restructures, source says

Verizon's new CEO, Dan Schulman, is implementing the company's largest-ever restructuring, planning to eliminate approximately 15,000 jobs, or 15% of its workforce, and convert 180 corporate retail stores to franchised operations. This aggressive cost-cutting measure, which includes reducing non-union management by over 20%, is a direct response to intense competition from rivals like AT&T, T-Mobile, and cable operators, which has led to shrinking subscriber growth and market share. While the announcement prompted a modest 1.5% rise in Verizon's shares, analysts remain cautious about whether these cost reductions will adequately offset the increasing expenses associated with customer retention in a highly competitive telecommunications landscape.

Analysis

Verizon's new CEO, Dan Schulman, is initiating a significant restructuring, planning to eliminate approximately 15,000 jobs, representing 15% of the workforce, and converting 180 corporate retail stores to franchised operations. This aggressive cost-cutting, including a 20% reduction in non-union management, directly addresses intense market pressure from rivals like AT&T and T-Mobile, and cable operators, which has led to declining subscriber growth. Schulman aims to transform Verizon into a "simpler, leaner, and scrappier business" by fundamentally restructuring its expense base.

Despite the challenging competitive landscape, Verizon's shares saw a modest 1.5% increase following the announcement, reflecting investor approval of the decisive action. This positive reaction contrasts with the company's stagnant stock performance over the past three years, gaining only 8% compared to the S&P 500's nearly 70% rise. The company added only 44,000 monthly bill-paying wireless subscribers in Q3, significantly trailing T-Mobile's over 1 million additions.

Schulman's strategy signals a departure from relying on price increases, despite Verizon maintaining the highest prices in the sector, towards a more customer-focused approach to drive subscriber growth. However, analyst Craig Moffett questions whether these cost reductions will sufficiently offset the higher planned costs associated with customer retention, particularly given the need to subsidize expensive handsets. This highlights the ongoing challenge of balancing cost efficiency with competitive subscriber acquisition and retention in a saturated market.

Key Decisions for Investors

• Investors should closely monitor the execution and financial impact of Verizon's restructuring efforts, particularly the realization of cost savings and their effect on operating margins.
• Evaluate future subscriber growth metrics and churn rates as key indicators of the new CEO's strategy effectiveness in a highly competitive market.
• Assess the ongoing competitive dynamics, especially the pricing strategies of rivals and the impact of cable operators, which could influence Verizon's long-term market position and profitability.