Armstrong Quits Verizon as It Breaks Oath ⎼ Report

Tim Armstrong, the boss of Verizon's Oath unit, is set to leave the US operator as Oath, which includes the Yahoo and AOL assets Verizon previously acquired, is absorbed into the bigger Verizon business, according to a report from the Financial Times.

Verizon Communications Inc. (NYSE: VZ)'s summer decision to integrate Oath into the telecom business, instead of running it as a standalone unit, has prompted Armstrong's departure, as well as the exit of Bob Toohey, the chief people officer, and CFO Vanessa Wittman, the Financial Times reports.

Oath's chief operating officer, Guru Gowrappan, having joined the business from Chinese ecommerce giant Alibaba, will reportedly take over the running of the unit.

Armstrong led AOL before Verizon acquired the Internet business for about $4.4 billion in 2015. He was subsequently responsible for the operator's $4.5 billion takeover of Yahoo last year, after which those units and other digital assets acquired the Oath brand.

Just as AT&T Inc. (NYSE: T) hopes to better compete against Netflix with its $85 billion takeover of Time Warner, Verizon believes its online assets will provide an answer to the advertising challenge from the likes of Google and Facebook.

But Oath's recent performance has been lackluster. In the April-to-June quarter, its revenues were unchanged, compared with the year-earlier period, at about $1.9 billion, even though group sales were up roughly 5%.

Under new CEO Hans Vestberg, who assumed the leadership position in the summer after a stint as Verizon's chief technology officer, there are already signs that Verizon is doubling down on its core connectivity business and prioritizing investment in the next-generation 5G mobile standard over other ventures. (See Verizon Names Vestberg as New CEO.)

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Vestberg, who presided over a slump in Ericsson AB (Nasdaq: ERIC)'s fortunes while previously boss of the Swedish vendor, is now focused on the launch of 5G fixed wireless access services, whereby 5G is used as a broadband alternative to fiber, before the end of the year. In 2019, the operator plans to launch smartphone-based 5G services, as does chief rival AT&T. (See Verizon Shows the Shape of 5G to Come and Ericsson Ejects CEO Vestberg.)

Operators in the US market and elsewhere initially expect 5G to bolster efficiency and boost connection speeds for customers. In the long run, the industry hopes the technology will provide connectivity in new industrial markets, and spur sales growth for telcos, although skeptics doubt 5G will be as revolutionary as proponents insist.

Armstrong's apparent departure and the ongoing difficulties at Oath will inevitably cast a cloud over telco efforts to diversify beyond connectivity and compete against web giants.

After spending about $9 billion on AOL and Yahoo assets, Verizon now appears to regard that business area as a much lower priority than investment in networks. Given the industry's disappointing track record on diversification, some analysts may regard this as a prudent move. But others may wonder where future sales growth will come from, with little room left for expansion in traditional connectivity markets.

The moves under Vestberg will certainly increase the pressure on Verizon to prove that 5G is more than just a more efficient way of connecting customers.

— Iain Morris, International Editor, Light Reading

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