Verizon CEO talks about the global economic impact of interest rates

Verizon CEO talks about the global economic impact of interest rates

The Fed’s stance of keeping interest rates higher for longer has a major impact on the US economy, but what about the rest of the world?

Verizon (VZ) Chairman and CEO Hans Vestberg sits down with Yahoo Finance Executive Editor Brian Suozzi to discuss Verizon’s performance through recent economic headwinds and how higher U.S. interest rates are filtering through the broader global economy as well.

“In markets, like in Europe, like Spain, this has a huge impact because it’s basically in the increased interest rates that are almost immediately passed on to the consumer, so you see the slowdown much faster than we see here (the United States),” explains Vestberg. “But we don’t see that. The reason is, of course, that not all of this interest increase goes directly to consumers. It affects variable interest rates, which the company may have.”

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Brian Susi: When you travel around the world, what impact do you see from rising interest rates mostly outside the United States?

Hans Westberg: So it’s a little different. I mean it depends on how interest rates in different countries end up affecting consumers. I mean, in the US, it’s still the case, a lot of interest rates haven’t gone to homeowners because of the current situation. In markets like Europe like Spain, there is a huge impact because it lies mainly in the increase in interest rates that is transmitted almost immediately to the consumer.

And then you see a much faster slowdown than we see here because normally you would think that with interest rates going up, we would see a very rapid slowdown in the United States, but we’re not seeing that. The reason, of course, is that not all of this increase in interest goes directly to consumers. It hits those that have variable interest rates, which the company might have and things like that.

So I think it is more stringent in Europe in particular. And then we see that the part of Asia continues to be very strong because it still has growth potential, where when you grow very quickly, you can actually manage interest rates in a better way.

Brian Susi: Are rates at these levels hampering how quickly Verizon can grow next year?

Hans Westberg: No no. I think we have landlord economics in everything we have. Basically, we own all our infrastructure, etc. For us, basically, think about it, we’re building one network, and then we want to have as many revenue generating activities as possible on top of the network. So it is a leverage model. So the more I can do with the network, the more revenue I can get. Then I have a scalable model where I get the best ROI in the industry. That’s the whole idea for us. So it doesn’t change.

My capex in 22 years was almost 24 billion. This year, my guidelines are between 18.25 to 19.25. I would end up in a higher range, closer to 19 billion. So we are still investing heavily in our business. And next year, we talked about it’s back to business as usual now after a sharp rise in five years of about $17 to $17 and a half billion in CapEx every year, which is still a significant amount. But this is not because of the economy. It’s more about the nature of how the network is built and where we are in the construction process.

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