Verizon(VZ)2024-10-22 15:21Financial Data and Key Metrics - Wireless service revenue grew by 2.7% YoY, with the company reporting the highest-ever quarterly EBITDA of 6 billion, reflecting strong cash flow generation [5] - Year-to-date wireless service revenue increased by 3.1%, or 12.5 billion in Q3 [51] - Free cash flow year-to-date was 2.5 billion increase in cash taxes [51] Business Line Performance - Postpaid net adds were 239,000, with 81,000 phone net adds in the consumer segment [6][29] - Prepaid net adds turned positive, with approximately 80,000 net adds excluding SafeLink [6] - Business segment consistently added between 125,000 to 150,000 net adds per quarter [6] - Broadband net adds were 389,000, with fixed wireless access (FWA) subscribers growing by over 1.5 million [50] - FWA revenue exceeded $550 million per quarter, with nearly 12 million broadband customers [14] Market Performance - The company achieved its FWA target of 4-5 million subscribers 15 months ahead of schedule, with plans to double FWA subscribers to 8-9 million by 2028 [6][15] - Fios performance rebounded after a weaker Q2, with the team targeting 35-40 million fiber passings post-Frontier acquisition [6][15] - The company announced deals with FIFA and Madison Square Garden Group for private networks, leveraging mobile edge compute capabilities [7] Strategy and Industry Competition - The company is focused on expanding its total addressable market (TAM) through investments in fiber, FWA, and mobility, aiming to cover over 100 million households [15][16] - Verizon's strategy includes a mobility-first approach, with C-Band and millimeter wave deployments driving both mobile and FWA growth [19][22] - The company is leveraging AI for customer care personalization and operational efficiencies, with potential revenue opportunities in compute storage and mobile edge compute [13] - The refreshed brand and customer-first offerings, including myPlan and myHome, are resonating with the market [10][11] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in meeting full-year guidance for wireless service revenue and EBITDA, with performance at or above the midpoint [7][51] - The company is focused on sustainable growth in service revenue, EBITDA, and cash flow, driven by investments in broadband and mobility [16][58] - Management highlighted the importance of network resilience, especially during natural disasters, and the company's ability to quickly restore services [3][4] Other Important Information - The company announced a tower transaction and a spectrum acquisition from US Cellular, adding capacity and creating more competition in the market [12] - Verizon's loyalty program, myAccess, offers exclusive deals and once-in-a-lifetime experiences, contributing to customer retention [46][47] - The company is targeting 7 million perk subscriptions, with plans to double this number by 2025, driving margin-rich revenue streams [45][124] Q&A Session Summary Question: Thoughts on the BEAD program and the bifurcation of fiber and FWA opportunities - The company plans to participate in the BEAD program where it makes sense, focusing on ROI in the Fios footprint [61] - Verizon's strategy is to deploy C-Band for mobility first, with FWA as a secondary opportunity, offering customers optionality between Fios and FWA [62][63] Question: Fixed wireless cadence and service revenue growth expectations - The company expects FWA net adds to be on the lower end of 350,000-400,000 in the short term due to C-Band deployment in suburban and rural areas [65] - Management did not provide specific 2025 guidance but highlighted actions taken to position the company for sustained growth, including prepaid turnaround and FWA growth [67] Question: Free cash flow outlook and Frontier deal - Management did not guide on free cash flow but noted headwinds such as cash taxes and interest rates, while emphasizing EBITDA growth as a focus [73] - The Frontier deal is seen as fair and good for all stakeholders, with no plans to increase the offer price [72] Question: Fiber expansion pace and FWA targets - The company is comfortable with its current pace of fiber expansion, combining Fios and FWA to serve customers with optionality [76] - FWA targets include business customers, with plans to cover 90 million homes and businesses by 2028 [97][99] Question: AI and satellite opportunities - AI is seen as a long-term revenue opportunity, particularly in enterprise applications, while satellite connectivity is still in early stages for consumer use [107][108] - Network slicing and satellite connectivity are expected to provide new revenue streams, particularly in the business segment [108] Question: Growth expectations and AI impact on upgrade cycles - Management is focused on growing wireless service revenue sustainably, leveraging postpaid momentum and new investments in fiber and FWA [113] - AI's impact on consumer device upgrade cycles is still uncertain, with the company maintaining a disciplined approach to promotions and retention [116] Question: Perks portfolio and wholesale partnerships - The company is satisfied with its perks portfolio, focusing on exclusive, high-value offerings with strong customer savings and margin accretion [124][125] - Verizon's unique ability to combine perks like MAX and Netflix provides a competitive advantage, driving customer retention and revenue growth [127][128] Question: Fiber and wireless market share correlation - The company sees a 500 basis point improvement in wireless market share in markets with fiber, driven by better marketing, distribution, and cross-sell opportunities [132][133] - Fiber economics are improving due to cost reductions, faster penetration rates, and mobile-plus-home benefits [131][132]