One of the world's biggest US-based international business
carriers is looking for a wireless operator to partner with.
And it won't necessarily be Vodafone.
using former MCI network
to carry traffic which
until weeks ago went
via AT&T or Sprint
Odd, that, considering the carrier in question is Verizon
Business and that Vodafone owns 40% of Verizon Wireless, the
cellular operation which is in essence the carrier's sister
But John Killian, CEO of Verizon Business, is clear. The
company will steer its corporate customers towards Verizon
Wireless for services in the US, and it needs a cellular
offering for the rest of the world. It is prepared to look
around, he notes.
Verizon Business is effectively the old MCI, taken over for
$6.7 billion, plus Verizon's own business with corporate
clients, and the core backbone networks of both companies, and
Verizon's extensive wholesale operation in the US.
It's no secret that the original Verizon didn't really have
a view of the world outside the US. Representatives in other
countries were there to liaise with local operators on behalf
of US customers.
"Oh, Verizon really had very little international reach,"
agrees Killian. "In this segment of the market we really had
none for the most part. MCI really brings all that. If you look
at my company, the 35,000 people, roughly 85% are from the
former MCI, 15% are from the former Verizon."
Killian is determined that the newly named Verizon Business
unit, which he now heads, should adopt much of MCI's
international perspective. Of the senior executives from the
Verizon side of the operation, he has more international
experience than most: about a decade ago, he was in London as
CEO of the cable TV and telecoms interests of Nynex in the
Nynex was one of the original "Baby Bells" in the US into
which the old AT&T was split in 1984, and as part of its
international ambitions it had 16 cable TV franchises in the UK
at the time - though the company later sold its interest to
NTL. Bell Atlantic, another Baby Bell, took over Nynex on the
way to becoming Verizon, and Killian ran its international
telecommunications business for a while.
He's been with Verizon and its ancestors for 27 years now.
"A fairly wide array of responsibilities over the years,
finance, operations, marketing, sales," he says. "They kept me
Now he's on a lightning tour of Verizon Business's
operational units across the US and Europe, just days after
Verizon formally took control of MCI after a year-long merger
"I'll give you the cities I've been to since January 22:
I've done employee meetings in Ashburn, Virginia; Atlanta,
Georgia; I did two in Texas, I did Colorado Springs, I did
Cary, North Carolina, I did New York. I did Frankfurt and
And now he's in the UK, in Reading, just to the west of
London, where Bernie Ebbers celebrated the dotcom boom by
building a vast curved glass-sided palace on a hill as the
headquarters for WorldCom's European operations. WorldCom went
bankrupt in July 2002 and as part of the recovery process it
was later rebranded MCI, one of the companies Ebbers had
swallowed up in the 1990s.
Now the MCI signs that replaced the WorldCom signs on the
glistening edifice have themselves been replaced with Verizon
Business signs, though the green buses that shuttle from here
to the centre of Reading and the rail station still show MCI on
But Reading is more than just a relic of the MCI days. It is
now the official headquarters of three international regions
for Verizon Business: Europe, Asia Pacific and a third covering
the Americas and emerging markets. Rory Cole, former CFO for
MCI in Europe, the Middle East and Africa, will be COO, and
he'll be joined by several ex-MCI colleagues. Two executives -
Craig Silliman, who came into MCI from Uunet, one of WorldCom's
acquisitions, and Mark Kearns, formerly head of consolidations
and reporting for Verizon Communications - are moving from the
US to Reading.
"I did a sales meeting yesterday and we're doing another
meeting here this afternoon," says Killian. He's in Reading
with his top management to meet customers and to meet staff, to
tell them that their nightmare is finally over.
It was a nightmare, though it would be surprising if any of
Reading's survivors are willing to talk about quite how close
the then WorldCom came in the summer of 2002 to shutting down
its European network and cutting off customers. At least one
large incumbent operator was within hours not only of
disconnecting all its services but also of starting a winding
up process under the very different European bankruptcy laws.
Some intense overnight work from the Reading team prised
electronic funds from the US so that the bills could be paid
and the European network survived.
And in the process WorldCom/MCI shed thousands of staff.
Investors who believed their company to be worth of the order
of $150 billion were left holding useless shares. And last
July, three years after the nightmare started, Ebbers was
sentenced to 25 years in jail for leading the largest corporate
fraud in history.
Enthusiasm about stability
So how are the ex-MCI, ex-WorldCom survivors around the
world reacting to their new ownership? "A lot of enthusiasm,"
says Killian. "They feel really good about Verizon Business.
The MCI people feel great. The MCI people have been through a
lot. They feel very good about the stability of the
The expanded Verizon now has a market value of around $100
billion, about 10% smaller than its rival AT&T/SBC, and it
employs about 250,000 people, of whom 55,000 are in Verizon
Wireless. Though inevitably there will be further cost savings
- particularly if AT&T succeeds in taking over BellSouth
and drives up competition still further - those ex-MCI people
must feel a lot happier than they did.
"We had three priorities when we began the transition
process," says Killian. "We kicked off the planning for this
around October 1. The first priority was being ready to go to
market." The company had to sort out sales teams and ensure
there was no overlap. Sales executives had to know "who their
accounts were, what the message was" and they had to be ready
to go to market.
"The second area was making sure we had plans in place to
realise the synergies from the transaction. You've got to
create value - this is all about value creation," says Killian.
"The third and equally important area is getting out in front
of the employees very quickly and making sure they understood
where the direction we were going was. The reception has been
There were questions because, he admits, "Verizon wasn't a
big international player", and people asked if the company was
really committed. "I wouldn't be here so quickly if I wasn't,"
he says. "And most of my team is here."
Accompanying Killian on the whistle-stop tour of its
European was sales VP Wayne Huyard, an ex-MCI executive; Fred
Briggs, VP of network operations who was also with MCI, and
Judith Spitz, the CIO - who was working on Verizon's
fibre-to-the-premises project until she moved to the new unit.
"We've been going city to city," says Killian.
The launch of Verizon Business marks a very different
beginning for the company around the world, he says. The
company had "more focussed, standalone investments", but " they
really weren't tied much to serving the large business customer
And then Verizon in the US got distracted when it won the
right the enter the long distance business - reserved since
1984 to separate companies such as MCI and AT&T. "We saw
the market opportunity," and focussed on the US and away from
the rest of the world, even in the enterprise area.
Verizon was gathering revenue of $500 million, says Killian,
from its enterprise customers and organic growth "was going to
take us too long", he says. "We had been looking for a while at
what was the right alternative to accelerate our efforts, and
we wanted to look at something that had the opportunity to
serve customers beyond the US borders. MCI was very attractive
He and his colleagues in Verizon recognise that for the
leading companies in the world "it truly is a global business
now", he adds. "Everyone is doing business off their own shore.
They need to do that to build scale in their business, to
become more efficient. So we're very excited to be back in the
There is some unravelling to do. "I think MCI was building
the operation as two different businesses. They had a US
domestic business and then they had an international
MCI's US consumer business "will be folded in and be managed
by the Verizon telecom business", he says. "Was something lost
there? I don't think so. From the MCI perspective it is not an
area of emphasis going forward. It was kind of in decline."
So how does Verizon define which customers should be
addressed by the main telecom operation and which by Killian's
Verizon Business. "It's roughly customers that bill in excess
of $250,000, and/or have 300 employees," he says. "If they're
less than that they would go back to the core telecom
He and his team focus on "the larger end of the market",
with "a premise based sales effort", compared with the mass
market activities using call centres that the main phone
One global business
As far as Killian's operation is concerned, "we're trying to
say it's one global business" and Verizon Business is
"extending the product capability". The merger was closed on
January 6 and "we picked the day one market launch to be
January 23". His verdict so far: "I think we've gotten off to a
pretty strong start, with the branding, the sales force
realignment, the product realignment."
Of course, both the ex-MCI people and the classic Verizon
people have been through mergers before, so they're used to
producing an integrated operation out of disparate parts.
"Clearly the biggest challenge in integration always
revolves around the systems. You've had systems architectures
grow up," says Killian. "All companies are in some ways a
compilation. If you look at MCI they had the Uunet operation,
the WorldCom operation, the MCI operation. Integrating the
systems - that's an area where we're pretty good, because we've
been through several big mergers. My CIO, Judith Spitz, has had
a lot of experience of mergers."
So has Verizon's previous experience, merging Bell Atlantic,
Nynex and GTE as well, helped with the process of integrating
MCI? "I think it definitely has helped us," says Killian,
citing "the experience and knowledge that we had within the
team - the CIO has huge amounts of experience in systems
Many people thought "the integration, particularly the
network integration, would be the real challenge", he says: "It
isn't. The network integration is going very smoothly."
As far as Verizon Business is concerned, now the merger is
done, which companies does he regard as his biggest
Competition from AT&T and BT
"The biggest in this segment would be AT&T. In the US in
terms of revenue we would be number two," says Killian. "When
you get offshore, when people think of carriers, we think we're
in a pretty strong number two position to BT. On some recent
bids - multinational kind of bids with offshore companies - we
kind of felt the biggest competition was BT, even on some that
we had won."
During his visit to the UK he had dinner with staff from ABN
Amro, which "signed a five-year total outsource contract with
MCI in December", when the merger heading for completion.
"I think the parties saw the marriage of MCI with Verizon as
a real positive - the stability of a company like Verizon was a
real positive. That's what we heard last night at dinner. The
two finalists were BT and Verizon."
Sometimes Verizon Business will partner with systems
integrators on a bid, and "sometimes we compete with them", he
says. "For truly the large multinational, we believe with scope
of network, with product portfolio, we're very well
Integrating MCI and Verizon's product portfolios was "pretty
easy", says Killian. "One side was clearly stronger in a
particular area. If you think about ethernet services on the
local side, Verizon was very strong there. On IP services,
managed services, IT services, it really is the former MCI
There was something else, he adds. "In the US the other
strength we were able to bring big time to it was the wireless
side. MCI didn't have wireless and that was something we were
hearing strongly from the enterprise customers in the US - that
they really wanted to have a more integrated offering."
And that's why he also wants an international mobile element
in the mix, to match what he can offer with Verizon Wireless in
Asked about his wireless offering outside the US, Killian
says: "We don't have one right now. We've asked the
international team to explore and say what is the capability
they think they need. We know what it is in the US. We believe
there are partnering options with people, that are in both
parties' best interest. We'll be exploring that."
So, just to be clear, it's not the case that Vodafone, owner
of 40% of Verizon Wireless, will automatically get the work? "I
don't know yet, to be honest with you. Vodafone is already
positioned in the marketplace here, very well positioned, a
great company. I don't know. It's too soon to tell on that.
It's too soon to tell."
Has he met Vodafone to discuss a partnership, on this
European trip for example? "No, not on this issue."
Back to the product portfolio. "Candidly the focus of new
product introductions has been domestic US so far," says
Killian. "Some of them were combining the IP and security
capabilities of MCI with the wireless portfolio. We also
introduced product combining ethernet access with some of the
private IP capabilities that MCI had. What you will see over
the next several weeks and months is that we have a series of
new product introductions."
And he and his colleagues have asked the team "to look as
much as we can into globalising the product offerings". He
admits that "we're a little bit operating as a separate
business internationally", and he wants the product team "as
we're rolling out a new product, have it have more global
Ethernet is a case in point, he adds. "We believe we can do
a lot more with ethernet access here in Europe than we've done
in the past. So we will have a focus on that."
An area he doesn't expect to get into is application
development. "That's really not a core competency of ours. We
would probably partner with people on that. That's a contrast,
because I guess BT has gotten into that world."
Killian and his colleagues are focussing on "the global
2000", the biggest companies in the world. "We have a very
strong position with the global 2000 accounts in the US," he
says. Verizon has "less of a share with companies headquartered
in other countries but that's an opportunity also", he
The top 180 customers, he adds, provide "around 25-30% of
revenue", and of those companies "something like 140-150 are
US-based and 30-40 are international-based".
About 75% of revenue comes from operations in the US for US
companies, with 25% either from non-US based companies or
US-based companies for their international operations. The
staffing reflects this split, with 6,000 of Verizon Business's
35,000 employees based outside the US.
It's not just corporate markets that Verizon Business is
chasing, though. "Once you have a network in place one of the
keys to profitability is getting as much traffic as you can on
your network," says Killian.
Verizon has "a substantial wholesale business in the
States", he notes, estimating "about 20%" of the revenue from
this source. "We've had a long heritage of being a provider to
people we also compete with. Our leading strategy is retail,
but while you have the network there and you have capacity if
we can strike profitable wholesale deals we'll do it."
Verizon is the backbone provider for telephony services of a
large US cable operator, he says. "They were concerned that,
because they're competing with Verizon telecom in the retail
space, would we change our strategy on the wholesale side. I
said to them, absolutely not, and I could give them confidence
because for years we've lived in that kind of environment,
where we were providing network capacity to the people we were
Moving traffic from AT&T
And the former MCI network is now being used to carry
Verizon traffic which until weeks ago went via AT&T or
Sprint. "We're moving that traffic onto the Verizon Business
network. Interconnecting the two networks was pretty smooth. We
were really complementary - Verizon is much stronger in the
local side and MCI was much stronger in the long distance and
the backbone, and the data service capability."
As the national network provider to Verizon's local
operations across the US, Killian's business is set to gain
traffic. "Verizon's core strategy right now on the local telco
side is that they're building out fibre directly to the home
and the small business," he says. "They're very ambitious,
deploying a lot of fibre optic, and they're doing that in order
to offer a much higher speed data service, to be able to offer
video to the home, and to be able to offer voice and wireless
of course. The other thing is, they use our backbone. They're
not building their own backbone. A lot of the traffic that
they're originating is coming to me."
As Verizon develops its IPTV service, it will be
concentrating operations in "a number of head-ends", he says -
"head-ends" being the cable industry term for the point at
which TV channels are gathered together for onward delivery to
the end customer. "Our backbone will be the one that will be
carrying it," he smiles. "That's the strategy."
That means that Verizon's broadband TV project will become a
core revenue stream for Verizon Business. "And it's going to
get even bigger. It puts a lot of traffic onto my network. That
was one of the big synergies in the transaction."
Even before that develops, in the first few weeks after the
closing of the merger, "we've already moved billions of minutes
that we've been taking from other carriers", says Killian. "We
haven't moved it all because it takes a little time, but you
will see a steady stream of traffic moving to us."
And that will apply internationally as well. When a Verizon
user in Poughkeepsie, New York, dials a number in Paris or
Prague, the former MCI network will carry the call for most of
the way. "It'll go to the Verizon Business gateway and our own
undersea cables that we have ownership in," says Killian.
Network integration was eased because MCI and classic
Verizon both sourced there equipment from the same set of
providers. "Both of us buy from Nortel. Both of us buy from
Alcatel. Both of us buy from Cisco."
There's a lot of work to do, particularly as MCI hadn't
completed its systems integration after the mergers that
created it. "It had a lot of billing systems," says Killian.
"We see a substantial opportunity here to both improve service
but also to gain efficiency. We've got a roadmap already laid
out for the next 18-24 months of IT investments that will allow
us to consolidate systems on the billing side, the support
systems. The other area is the portal side, so the customers
can directly interact with us. We think there's a lot of
How far has Verizon reached in that process? "We kind of
know what direction we want to go, what the main billing
engines are," he says. "We do a lot of internal development.
Verizon has a huge internal IT capability. We do use outside
suppliers but we do a lot of the development ourselves."
CIOs of Verizon Business and the other main divisions of the
company meet in an IT Council. "We strive to use similar
vendors, we strive to share resources," he says. "Let me give
you an example: internal data centres. We will probably share
the management and the capacity of the data centres with the
Verizon core group. It's the way to gain efficiency. We'll be
looking to do that in a lot of cases."
The main company has an IT operation in Chennai and
Hyderabad in India, and "we will put some resource also in
India to help us with some of the development".
Verizon Business has a capital budget: "We haven't publicly
disclosed the amount but it's fairly significant. Some of it
goes towards IT investment but a lot of it goes on expanding
network capability and also providing more capacity and
supporting new product introductions. We will be investing,
both internationally and domestically in the US."
Investment in switches
There will be some network investment. "We will add some
switches this year," he says, "because as we take the traffic
on to our network that was going to other carriers it's putting
a pretty heavy load on the switch side so we will be deploying
So what distinguishes one global telecoms company, such as
Verizon Business, from another, such as AT&T or BT or one
of the others? "One, scope of owned network."
The company has more international network than AT&T, he
says. "We do - I could get my network guy to talk to you." And
that brings "the ability to go to a lot of different
On top of that, he notes "the management capabilities that
we bring in terms of a broad array of services. We've been
doing for a number of years a lot of outsourcing. We've been
very early on in IT services - not applications development,
but running data centres for people. One of our first, 17 years
ago, was an outsource for DaimlerChrysler. We've been doing it
for a long time."
Thirdly, service levels. "Globally it's really your reach,
the depth of your product portfolio and then your experience
with service. A good illustration is ABN picking us, because
that was a substantial contract award. Winning that just showed
the depth of the offering."
And talent. "You've got to have the right people too."
Necessary attributes are "speed, the ability to be quick in the
marketplace, agility", he says. "We're pretty good at that. And
MCI brings a lot of that. I'd say MCI was better at that."