Verizon (VZ) 2025 Conference Summary Company Overview - **Company**: Verizon Communications Inc. (VZ) - **Event**: Citi's 2025 Global TMT Conference - **Date**: September 4, 2025 Key Points Industry Focus - **Telecommunications**: Emphasis on wireless service revenue, adjusted EBITDA, and free cash flow growth - **Broadband Services**: Focus on mobility and broadband, including Fixed Wireless Access (FWA) and Fios Financial Performance - **Service Revenue Growth**: Achieved $1 billion in service revenue growth, up 2.4% in the first half of the year [8] - **Adjusted EBITDA Growth**: Reported 4.1% EBITDA growth, translating to $1 billion increase [45] - **Free Cash Flow Guidance**: Raised guidance for free cash flow to between $19.5 billion and $20.5 billion for the year [69] Strategic Priorities - **Operational Efficiency**: Focus on cost efficiency and operational performance [4][6] - **Capital Allocation**: Prioritizing investments in business, maintaining dividends, and deleveraging the balance sheet [80][82] - **Spectrum Investments**: Open to acquiring additional spectrum if it aligns with value creation [14][15] Growth Opportunities - **MyPlan and Perks**: Strong value proposition with MyPlan, aiming for 15 million perks in the portfolio, generating an annualized run rate of $2 billion [9][10] - **Convergence Strategy**: Targeting increased customer lifetime value through bundled services [11] - **AI Connect**: Exploring opportunities in AI workloads leveraging existing infrastructure [12] Market Dynamics - **Competitive Landscape**: Acknowledgment of a competitive market, with a focus on wireless service revenue rather than net adds [23] - **Churn Management**: Elevated churn rates observed, with strategies in place to reduce churn through value guarantees and convergence [27][28] Customer Engagement - **Upgrade Trends**: Noted a 19% growth in gross adds, with a focus on maintaining financial discipline during device refresh cycles [32][39] - **ARPU Performance**: Emphasis on growing average revenue per user (ARPU) through pricing actions and premium plans [35] Fixed Wireless Access (FWA) - **Subscriber Growth**: Over 5 million FWA subscribers, with a target of 8 to 9 million by 2028 [54] - **Network Deployment**: Continued rollout of C band to support FWA growth [55] Frontier Acquisition - **Regulatory Progress**: Secured approval in 8 out of 13 states for the Frontier acquisition, targeting completion by Q1 2026 [61][62] - **Synergy Potential**: Expected to achieve at least $500 million in operating run rate synergy by the third year post-acquisition [63] Convergence and Customer Bundling - **Converged Bundles**: Approximately 18% of customers currently utilize converged bundles, with potential for growth [67] - **Customer-Centric Approach**: Convergence strategy driven by customer demand, with a focus on enhancing service offerings [68] Capital Management - **Debt Reduction**: Reduced debt by $7 billion over the past year, with a target leverage ratio of 2 to 2.25 [70][71] - **Shareholder Returns**: Commitment to maintaining dividends and considering share buybacks once leverage targets are met [82] Operational Efficiency - **Cost Transformation**: Ongoing efforts to improve efficiency through AI and legacy network decommissioning [44][45] Future Outlook - **Market Resilience**: Despite potential industry growth slowdowns, demand for connectivity remains strong [78] - **Strategic Asset Optimization**: Continuous evaluation of business portfolio for potential divestitures to enhance focus on core operations [83][84]

Core Viewpoint - The company adopts a dual-driven product strategy focusing on wireless communication modules and IoT solutions, aiming to create differentiated and innovative core competitive advantages in the market [2]. Group 1: Product Strategy - The company develops customized solutions in vertical industries, including smart modules, high-performance modules, smart cockpits, FWA, and IoT, to enhance its competitive edge [2]. - The company has extensive experience in product development and industry application in the smart module and solution field, with ongoing investments in high-performance modules and generative AI applications [2]. - The company offers module products with heterogeneous computing power ranging from 0.2T to 48T, supporting large model deployment and operation at the edge, adaptable to various communication methods like 5G, Wi-Fi, and Gigabit Ethernet [2]. Group 2: R&D Investment - In 2024, the company's R&D investment is projected to be 256 million yuan, accounting for 8.69% of its revenue, reflecting a strong commitment to enhancing product and technology competitiveness [3]. - The company focuses its R&D efforts on high-performance module applications, 4G/5G smart cockpit modules, automotive-grade 5G+V2X modules, cockpit computing modules, and edge large model deployment and optimization [3]. Group 3: Corporate Actions - The company submitted its application for the issuance of overseas listed shares (H shares) to the China Securities Regulatory Commission, which has been accepted, indicating plans for listing on the Hong Kong Stock Exchange [4]. - The company approved a stock option and restricted stock incentive plan, granting 500,000 restricted shares at a price of 22.84 yuan per share and 500,000 stock options at an exercise price of 45.67 yuan per option to eligible participants [5].

Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive outlook for future performance [5]. Core Views - The company adopts a dual-driven product strategy focusing on wireless communication modules and IoT solutions, which creates a competitive advantage through customized solutions for various vertical industries [1]. - The company is committed to high R&D investment, with an allocation of 256 million yuan for 2024, representing 8.69% of revenue, aimed at enhancing product and technological competitiveness [2]. - The company has submitted its application for overseas listing (H shares) to the China Securities Regulatory Commission, indicating plans for expansion and increased market presence [2]. - The company has implemented an incentive plan granting stock options and restricted stocks to key personnel, which may enhance employee motivation and align interests with shareholders [3]. - The forecast for the company's net profit has been revised upwards for 2025 and 2026, with expected profits of 182 million yuan and 267 million yuan respectively, reflecting a strong growth trajectory driven by AI applications and product iterations [3]. Financial Summary - The company’s revenue is projected to grow from 2,147 million yuan in 2023 to 5,556 million yuan in 2027, with a compound annual growth rate (CAGR) of approximately 17.79% [4][7]. - The net profit is expected to increase significantly from 65 million yuan in 2023 to 357 million yuan in 2027, indicating a robust growth rate [4][7]. - The company’s earnings per share (EPS) is forecasted to rise from 0.25 yuan in 2023 to 1.36 yuan in 2027, reflecting improved profitability [4][7]. - The price-to-earnings (P/E) ratio is projected to decrease from 187 in 2023 to 34 in 2027, suggesting a more attractive valuation over time [4][10]. Key Financial Metrics - The gross margin is expected to stabilize around 17.5% to 18.8% from 2025 to 2027, indicating a focus on maintaining profitability despite competitive pressures [9]. - The return on equity (ROE) is projected to improve from 4.4% in 2023 to 15.8% in 2027, reflecting enhanced efficiency in generating profits from equity [9]. - The company’s total assets are anticipated to grow from 2,145 million yuan in 2023 to 3,696 million yuan in 2027, indicating a strengthening balance sheet [8].

Financial Data and Key Metrics Changes - The competitive intensity in the market has increased, with gross adds showing double-digit growth on the postpaid phone side [6][10] - The company has seen a slight increase in churn due to price hikes and competitive pressures, but expects to return to a business-as-usual (BAU) posture in the second half of the year [54][74] Business Line Data and Key Metrics Changes - The broadband and mobility businesses are identified as the two engines of growth, with a clear path to becoming the number one converged player in America [10][14] - The company aims to cover 40 million homes with fiber and continues to see strong momentum in its Fixed Wireless Access (FWA) product, targeting 8 to 9 million subscribers [13][24] Market Data and Key Metrics Changes - The switcher pool has increased, with both port-ins and port-outs rising, indicating a competitive environment [6][10] - The company has a strong position in the prepaid market, having gained market share over the last three quarters [37][38] Company Strategy and Development Direction - The company aims to be the number one converged player in America, focusing on both mobility and broadband [10][14] - The strategy includes leveraging AI for operational efficiencies and enhancing customer care, which is seen as a potential differentiator in the market [106][109] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the competitive landscape but believes the company's value proposition resonates well with customers [7][10] - The company expects to see continued growth in gross adds and a reduction in churn as it implements its strategies [54][74] Other Important Information - The company has committed to a million-plus new fiber offerings post-acquisition of Frontier, with a focus on reducing build costs through automation and AI [21][23] - Adjacent products and perks are becoming a significant part of the business, with a projected $2 billion run rate and mid-30% margins [78][81] Q&A Session Summary Question: What are the expectations for gross adds in the second half of the year? - Management expects gross add momentum to continue due to a strong value proposition and improved sales execution [56][61] Question: How does the company view the competitive landscape and its impact on ARPU? - The company does not aggressively pursue pre-to-post migration but focuses on serving customers well in the prepaid space, maintaining a premium mix [63][64] Question: What is the strategy for reducing churn? - A strong value proposition, cross-selling opportunities, and loyalty programs are key strategies for reducing churn [69][72] Question: How does the company leverage AI in its operations? - AI is used to enhance customer care, improve operational efficiencies, and provide personalized experiences [106][109]

Verizon (VZ) 2025 Conference Summary Industry Overview - The conference focused on the telecommunications industry, specifically Verizon's strategies and performance in the consumer wireless market and broadband services. Key Points and Arguments Consumer Wireless Business - Verizon has introduced a new five-year price lock guarantee to enhance customer confidence and satisfaction, addressing consumer feedback on price predictability and transparency [2][4][6]. - The "MyPlan" initiative has been successful, with 40-50% of the customer base already transitioned to this plan, which has resulted in significant revenue growth despite a reduction in price premiums [5][6]. - In April, Verizon experienced double-digit growth in gross additions, indicating strong customer resonance with the new pricing strategies [7]. Churn and Revenue Growth - The company reported higher churn rates in Q1, primarily linked to customer cohorts affected by recent price increases [10][12]. - Verizon aims for a balanced approach to service revenue growth, targeting an 80-20 ratio between price increases and volume growth [9][44]. - The churn is expected to stabilize in the second half of the year as the impact of price increases diminishes [11][54]. Market Dynamics - The overall market for postpaid services is projected to grow between 8 million to 8.5 million in 2025, with a significant portion attributed to the migration from prepaid to postpaid plans [22][27]. - The prepaid segment has shown resilience, with Verizon achieving strong results despite broader market challenges [31][32]. Convergence Strategy - Verizon is focusing on convergence, with 16% of its customer base currently utilizing converged services, and plans to double this figure in the coming years [69][70]. - The company aims to cover 100 million homes with broadband services, leveraging both fiber and fixed wireless access (FWA) [70][76]. Fixed Wireless Access (FWA) - Verizon targets 8 to 9 million FWA subscribers by 2028, with strong demand and market share growth observed in both Tier 1 and Tier 2/3 markets [78][86]. - The company has seen significant net additions in broadband, with a focus on maintaining a sustainable business model without jeopardizing its mobility network [80][81]. Financial Discipline and Cost Management - Verizon has maintained a disciplined approach to pricing and promotions, with expectations that promotional amortization will peak in 2025 and then stabilize [54][56]. - The company has not experienced overall cost increases in fiber deployment, with a reported 10% reduction in costs year-over-year due to improved technology and operational efficiencies [96][97]. Value Proposition - Verizon's value proposition centers on having the best network and providing significant value through transparent pricing and unique offerings like the MyPlan and MyHome initiatives [99][102]. - The company emphasizes that value is not solely about price but includes the overall customer experience and service quality [102]. Additional Important Insights - The competitive landscape remains intense, with Verizon maintaining a robust credit check policy for postpaid plans, differentiating itself from competitors who have relaxed standards [33][34]. - The company is strategically positioned to adapt to economic fluctuations, with a focus on segmentation and tailored offerings across various customer demographics [39][40]. This summary encapsulates the key discussions and insights from the Verizon 2025 Conference, highlighting the company's strategic initiatives, market dynamics, and financial outlook.