Verizon Communications Inc. set the stage for the $130 billion buyout of Vodafone Group Plc’s stake in their U.S. venture two years ago, when it named a new chief executive officer: Lowell McAdam, a 20-year veteran of the wireless industry with long-standing ties to Europe.
Executives at Verizon had been haggling to seal the deal for a decade, rebuffed by Vodafone counterparts who balked at parting with their share of the most profitable U.S. wireless carrier. Vodafone’s top brass also clashed with Verizon’s then-CEO, Ivan Seidenberg, a former cable splicer from the Bronx whose brusque manner failed to win over the Europeans.
Enter McAdam, a soft-spoken Ivy League-educated engineer who had worked with Vodafone CEO Vittorio Colao since the 1990s. From the start, McAdam vowed to make expanding the wireless business his top priority. He adopted a more collaborative relationship with suppliers, such as mobile-phone makers. His demeanor, familiarity with Vodafone executives and willingness to pony up cash reinvigorated the talks.
“This deal was a nonstarter until McAdam came on board,” said Kevin Smithen, an analyst with Macquarie Securities USA Inc. in New York. “You have to give McAdam credit for building a strong relationship with Vodafone and earning their trust.”
The negotiations culminated with yesterday’s announcement that New York-based Verizon will acquire Vodafone’s 45 percent stake in Verizon Wireless, giving the 14-year-old business an implied market value of about $290 billion -- more than Google Inc., the world’s largest Web-search provider.
“We felt we had many of the assets -- wireline and enterprise assets -- to do some exciting things here in the U.S.,” McAdam, 59, said in an interview. “That’s where the return was best for us.”
Forged in 1999 by combining Vodafone’s wireless properties with businesses owned by Verizon’s precursor companies, Verizon Wireless grew into the largest U.S. mobile-service provider under McAdam and Seidenberg. McAdam served as CEO of the partnership before becoming president of the parent company in 2010 and CEO the following year.
With full ownership under his belt, McAdam will probably use the bigger share of profit generated by Verizon Wireless to bolster the company’s network. He faces accelerating competition in the U.S., notably with Sprint Corp. investing more after a $21.6 billion takeover by Japan’s SoftBank Corp.
Vodafone shares declined 5 percent to close at 202.50 pence in London. In New York, Verizon’s stock fell 2.9 percent to $46.01 at the close.
McAdam grew up north of Buffalo, New York, where his father sold farm machinery and his mother was a teacher. “Growing up in a small town in upstate New York was a great place to start,” he said yesterday.
It was there that he developed a fondness for welding and machining tools, according to a 2009 interview he did with the University of San Diego, where he earned a master’s degree in business administration. McAdam also restores 1970s-era muscle cars, according to the university’s video.
McAdam’s biggest project now will be to transform Verizon into a provider of a broad range of telecommunications, from Wi-Fi to cloud computing, while lessening its dependence on a shrinking landline phone business.
A former naval engineer and veteran of the mobile-phone industry, McAdam took over as Verizon’s CEO in August 2011. He vowed to turn the company into less of a utility -- “a networking company one step away from just a pipe” -- and more of a wireless-services provider.
Even before the Verizon Wireless deal, McAdam had already begun acquiring wireless assets, spending $5 billion to make the network more robust. The biggest came last year, when he bought airwaves for $3.6 billion from Comcast Corp., Time Warner Cable Inc. and Bright House Networks.
The transaction was notable for another reason: It demonstrated McAdam’s ability to work with enemies. In this case, he faced the cable companies that are vying with the telephone industry for phone, TV and Internet subscribers.
“This was underappreciated,” said Smithen, the Macquarie analyst, who has a neutral rating on the shares. “They did a deal with the devil, the cable companies, and they got good spectrum at a very good cost. It was a real coup.”
McAdam has also eased Verizon into a more collaborative relationship with suppliers such as phonemakers -- a big step for a company that often insisted devices carry only its logo.
After watching rival AT&T Inc. tap a groundswell of demand for smartphones through an exclusive deal to sell Apple Inc.’s iPhone, McAdam sought out a partnership with Google, another company with which Seidenberg had differences.
In 2009, McAdam took a trip to Google’s headquarters in Mountain View, California, to work with then-CEO Eric Schmidt on plans for smartphones that would use the search company’s mobile Android platform.
“I give him a lot of credit for the success they’ve had with Google,” said Jennifer Fritzsche, an analyst with Wells Fargo & Co. in Chicago who rates the shares as outperform. “It got the Android phones going at a time when AT&T had the iPhone exclusively.”
McAdam received a bachelor’s degree in engineering at Cornell University before his graduate work at the University of San Diego. In between, he served in the U.S. Navy.
“You don’t survive six years with the Navy Seabees as a wall flower,” McAdam said yesterday, referring to the service’s construction battalion.
The Navy gave him a taste of life abroad, and McAdam extended his overseas focus after beginning his career in the wireless industry. He worked in the 1990s at Vodafone AirTouch, a unit of Newbury, England-based Vodafone. It was while developing startups in countries such as Italy that he first worked with Colao. AirTouch joined with Bell Atlantic Mobile Inc. and GTE Corp. to form Verizon Wireless.
Jan Neels, a former president of AirTouch International, said he remembers McAdam as being “down to earth,” task-focused and persuasive as the company worked on creating partnerships in Germany, Spain and Italy.
Getting Vodafone on board with the sale of its Verizon Wireless stake wasn’t easy.
As CEO, Seidenberg consistently said he wanted to acquire Vodafone’s stake in the business, at the right price. Yet he differed with Vodafone’s CEO at the time, Arun Sarin, a person close to the companies said last week. Sarin retired in 2008, and relations improved when his successor, Colao, began interacting with McAdam, said the person, who asked not to be identified because the discussions were private.
Attempts to reach Seidenberg, an advisory partner at Perella Weinberg Partners LP, through e-mail and company representatives didn’t result in an immediate reply. Bob Varettoni, a Verizon spokesman, said the deal’s timing had more to do with the capital markets than the CEOs’ personalities.
As for McAdam, Neels said he is “very smart in how he deals with people.” He “worked in an environment --especially in the joint ventures where we didn’t have the majority -- where we had to convince the partners to do it our way.”