Investment Analyses –
Verizon Communications, Inc.
Overview
Verizon Communications, Inc., a technology company that operates through its subsidiaries,
provides communications, information, and entertainment products and services to consumers,
businesses, and governmental agencies worldwide. Their focus is mostly in expanding the
wireless market, as in smartphones, basic cell phones, tablets, notebook computers, and has a
multitude of LTE internet options available as well as a high speed-internet service. It offers
machine-to-machine services that support devices used in health monitoring, education,
manufacturing, utilities, distribution, and consumer products markets. As of December 31, 2014,
it had 108.2 million retail connections. The company was founded in 1983 and is based in New
York, New York (Yahoo!Finance). As of Spring 2015, Verizon Communications, Inc., holds
approximately 35.93% of industry market share.
Industry Outlook
Due to growth in technology demand, this industry is expected to grow at a rate of 2.8% over the
next year. Part of this is due to the increasing reliability on wireless telecommunications, and the
unveiling of new and improved smartphones, tablets, and notebook computers.
Ticker
VZ
Market
$110,984.00
Value of
Investment
Investment Student
Group
Equity
Management
Industry
Utility Telephone
IVA Rating
BB
ESG Related Issues
The main issues with companies in the telecommunication industry usually include environmental and social governance issues. In
Verizon Communication’s situation, the primary topics involve issues in the labor management, privacy and data security, and access
to communications, based on MSCI’s Intangible Value Assessment (IVA) on Verizon Communications, Inc. Their overall IVA rating
went down from the previous year, going from a BBB to a BB.
Since Verizon has recently acquired the largest percentages of shares in the market with their acquisition of Alltel, they have a very
large labor workforce to account for with approximately 176,800 employees, the biggest amount in the industry set. They have been
facing periodic labor disputes with unions in the US, combined to high exposure to operational risks associated with labor
management issues, making their overall labor management score much lower than the rest on the industry, with a score of 2.8 out
of 4.8 (the industry average). Since 2009, they have laid off about 25,000 employees due to restructuring its business specifically in
the wireline segment. This puts the company at risk for added strain on employee relations and elevates risk of disruptions.
However, Verizon has been noted in recently improving the strength of their training programs, hopefully decreasing governance
risk within the company.
The telecommunications industry is known for facing high exposure to regulatory reputational risks when it comes to privacy and
data issues. Verizon is the second largest telecommunications operator in the US, therefore making them responsible for a large
quantity of customer information which now includes not only names and addresses but also call records, websites visited and
information gathered through mobile devices and apps. If breached, it could be a major liability for the company, especially as
increased privacy and data security regulation in the US continues to evolve. This issue was rated as “severe” according to the IVA
assessment, although they have many preventative procedures in place and have never been involved in significant data breaches in
the last 3 years. This specific company received a score of 3.6 out of the industry average 3.1, and is only included in ESG risks for
being so vulnerable to the breaching of data.
Another major issue for Verizon is their access to communications. Domestically, they are doing an outstanding job, even making
devices for seniors, services tailored for the visually impaired, making technology more user-friendly for students in every-day
applications, and a major focus on expanding high speed access in rural areas. However, this may benefit them greatly for now, but
there are few opportunities for long-term growth in the developing countries market, unlike a few of its peers. There is a much less
competitive market within the developing countries as their middle classes and increasing demand for access to the digital world. If
they do not act soon, this puts them at risk for losing major profits in the long-term frame of mind.
- Tyler Gilmore for the Sustainable Investing Advisory Committee
September 2015
References
Verizon Communications, Inc, (2015). Profile, business summary. Yahoo!Finance. Retrieved
from http://finance.yahoo.com/q/pr?s=vz
Blau, G. (2015, August) Wireless Telecommunications Carriers in the US. Retrieved from
www.ibisworld.com
MSCI Intangible Value Assessment (2014, January), Verizon Communications, Inc. Retrieved from
www.esgoncampus.msci.com