Verizon Communications Inc. at Bank of America Media, Communications and Entertainment Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Barden - BofA Global Research - Analyst : Perfect. Before we jump into the business, I mean, I just wanted to maybe, given where we are in the political cycle and where people wonder where we are in the economic cycle, for you guys, it's the largest wireless carrier in America. What does the outcome of the presidential election mean to you? And what is the economic circumstances that you're planning on for your business?

Question: David Barden - BofA Global Research - Analyst : And just before we leave that subject, ACP, any cleanup that we need to expect in the third quarter?

Question: David Barden - BofA Global Research - Analyst : And just on the economic side, at the beginning of the year, we were looking at higher inflation, higher rates for longer. Then all of a sudden, now we're wondering if maybe recession is around the corner. How are you budgeting? What are you seeing on the ground in your business?

Question: David Barden - BofA Global Research - Analyst : So we welcomed you here last year. And you've been now kind of in your role as the Head of Consumer for about 15, 16 months. And during that time, I think Verizon has been able to show some pretty good progress in gross add growth. You still have kind of year-to-date negative net adds. You've been guiding to positive for the year, which means we need to have a nice step up in the second half. So what needs to happen to get there in 2H '24?

Question: David Barden - BofA Global Research - Analyst : So I think that the concern would be that what we kind of had in that 2021, 2022 period was about nine million net adds; that's shrinking. So in a shrinking market opportunity, how does Verizon maintain that gross add momentum?

Question: David Barden - BofA Global Research - Analyst : So another kind of challenge or perceived challenge is this idea that -- of convergence. It's a topic we're all talking about and debating. And the question is that the consumers are increasingly going to want to buy a wireline and a wireless broadband together. And that as fiber expands, as cable continues to progress in their mobile strategy, that Verizon is at a deficit in that regard. So not only do we have a shrinking opportunity set, but we have a changing buying pattern. How do you respond to that?

Question: David Barden - BofA Global Research - Analyst : So any announcements you want to make about fixed wireless access and fiber expansion? Anything like that?

Question: David Barden - BofA Global Research - Analyst : Right. And I just wanted to follow up a little bit on that, on the fixed wireless access. So I think you said that you've built that C-Band to Tier 1 markets. You're, I think, most of the way done with Tier 2 markets. We really haven't hit the Tier 3 markets yet. So is it -- first of all, I guess, is that the capacity? Do you mean like expanding the total addressable market? How big is the addressable market today, and how big could it be?

Question: David Barden - BofA Global Research - Analyst : So 100% US coverage of fixed wireless access --

Question: David Barden - BofA Global Research - Analyst : And then just thinking about the fiber side, a couple of different things. One of the big trends has been for partnerships to emerge to source capital from other places to accelerate the fiber build. Is that something Verizon would consider?

Question: David Barden - BofA Global Research - Analyst : So does that mean given that fiber, combined with wireless is such a strong proposition, should you be doing more than you're doing now? Should you be doing it in new places maybe outside your footprint?

Question: David Barden - BofA Global Research - Analyst : Okay. I tried.

Question: David Barden - BofA Global Research - Analyst : Okay. So let's get back to the kind of business economics. First, on pricing. So you've been -- you've kind of cautioned that the pricing strategy has had an impact on slightly elevated churn. And now your strategy is to improve net adds by lowering churn. So does that mean that you're taking the foot off the pricing pedal? And if you are, what are the drivers to that?

Question: David Barden - BofA Global Research - Analyst : And so on the volume side, you pointed out that you believe that roughly 50% of the contribution to the addressable market opportunity is prepaid to post. So for a long time, you really didn't have a direct strategy there. You had a wholesale relationship with TracFone, then you added the wholesale relationship with cable. We'll get to that. But TracFone has kind of underdelivered as an opportunity set. Should we be expecting now two years in that TracFone is performing and we're going to start cream skimming that, and that should be another source of growth for Verizon in postpaid?

Question: David Barden - BofA Global Research - Analyst : And one of the things that came up in the first half -- and I just want to kind of make sure there's no surprises -- is when you kind of initially came up with the, we're going to be postpaid phone net add positive for 2024, no one kind of knew that part of that puzzle was going to be the add-a-line program, which surprised us a little bit. As we think about the full-year postpaid phone net add positive, are there any more surprises we need to know about?

Question: David Barden - BofA Global Research - Analyst : You will, okay. So kind of dovetailing with this is that one of the things that's helped churn has been that we're in kind of a low-switcher environment. One of the things that's hurt that add growth is that we're in a low-switcher environment. One of the things that investors have been talking about is the impact of what the new iPhone launch could be, if maybe not this year, even next year. Could you kind of opine a little bit on both -- all sorts of things to talk about, but just what's your base case assumption for what we're going to see this coming quarter or this coming September when we see the new iPhone come out?

Question: David Barden - BofA Global Research - Analyst : So I think you make a good point, which is that there was a supply push around the 5G cycle because getting 5G handsets in consumers' hands was a good for the carriers to balance out the network, to take advantage of some of the advantages of the new spectrum that you guys have deployed. There's a hypothesis that in Verizon circumstance, because of your kind of market share position, your desire for postpaid phone net adds, that there's a reason why you might want to push these phones. Is that untrue?

Question: David Barden - BofA Global Research - Analyst : So as you said, the push for positive net add growth is really internal. It's churn, it's things you've talked about. You're not going to look at the new iPhone as a, we want to push this to get our share back?

Question: David Barden - BofA Global Research - Analyst : So I want to talk about just your position on consumer AI because that is the thing that people think is going to -- if not now, then maybe after another year of development and marketing that we're going to finally put something in the phone that people care about. What do you think about that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 12:00PM, VZ.N - Verizon Communications Inc. at Bank of America Media, Communications and Entertainment Conference

Question: David Barden - BofA Global Research - Analyst : So I think that that's interesting. So like a couple of years ago, you had an Analyst Day, and there was a bunch of bars and contributing factors to what would be helping revenue from the 5G investment. Fixed wireless access was a very small bar and lots of industrial applications were a big bar. And what's happened is fixed wireless access has been the killer app on the 5G network so far. But AI does seem to be kind of a platform for there to be a whole new genre of innovation, which when you say needs edge compute, you guys have spent a lot of years working on the mobile edge compute. Just out of curiosity, where do you see the edge landing? Is it at the tower? Is it in second, third-tier data center markets? Where do you -- where does that live?

Question: David Barden - BofA Global Research - Analyst : $500 million? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 12:00PM, VZ.N - Verizon Communications Inc. at Bank of America Media, Communications and Entertainment Conference

Question: David Barden - BofA Global Research - Analyst : And you didn't mention -- or you mentioned that you might talk about how you're using AI internally. But as we talk about the cost side of the equation, I'm imagining that it factors into it. Kind of talk about what Verizon can do while you're trying to do these things on churn, while you're trying to integrate the TracFone business. What's left to do on the cost structure side?

Question: David Barden - BofA Global Research - Analyst : Before we leave the AI topic, we saw Lumen recently announce a $5 billion deal or series of deals with, we believe, Microsoft to do AI network connectivity for new data centers that are going to get built in the next few years. Why didn't Verizon win that deal? I know this is not your space, but --

Question: David Barden - BofA Global Research - Analyst : Before we leave costs, I just wanted a quick touch base. So Verizon -- sorry, not Verizon, AT&T just saw about 15,000 workers go on strike as they're trying to renegotiate labor contracts. Obviously, inflation has tempered. But if you compound inflation over the last two years, costs are much higher than they were. What's your kind of organized labor situation collective bargaining?

Question: David Barden - BofA Global Research - Analyst : No expiration. Okay, good. So I wanted to get back to just real quick, the wholesale side, not the question you think I'm going to ask. But what -- Verizon is, as part of its relationship with the cable industry, kind of a technology partner in helping integrate the MVNO, the WiFi. And one of the things that cable has been talking about more has been backfilling some of their relationship with Verizon by building out their own facilities. Typically, they talk about CBRS spectrum. Could you talk about the risk to Verizon's wholesale revenue stream from that potential technological substitution?

Question: David Barden - BofA Global Research - Analyst : Okay. So industry structure, stable; pricing moving in the right direction. Churn should be moving in the right direction. Net adds should be getting positive. No real risk to wholesale, no real risk of a big upgrade cycle impacting cost structure or churn or the switching market overall. Cost moving down, no labor risk. So current course of speed, it looks like you guys are on track to get to your target leverage ratio in the first half of 2025. What should we start getting excited about that Verizon can do once deleveraging is not the number one use of funds?

Question: David Barden - BofA Global Research - Analyst : And could you be driving more shareholder value by investing faster or more in fiber? Or faster or more in FWA or faster and more in the C-Band?

Question: David Barden - BofA Global Research - Analyst : But are you not at all concerned that if FWA is kind of your home broadband, that it's not enough broadband for the average home? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 12:00PM, VZ.N - Verizon Communications Inc. at Bank of America Media, Communications and Entertainment Conference

Question: David Barden - BofA Global Research - Analyst : So I've got -- if I have time, I've got a couple of more questions on that. But you mentioned how strong the churn benefit is by merging a mobile product and a fiber product, stronger than a fixed wireless access product. If AT&T, which now has a plan to have 30 million homes passed with fiber, maybe going to 45 million homes passed with fiber or maybe more when you start looking at BEAD and out-of-territory footprint for them, does that not impede your ability to achieve your growth goals if they're not going to have as much switching the way you have not had as much switching in your fiber footprint?

Question: David Barden - BofA Global Research - Analyst : I will ask them tomorrow.

Question: David Barden - BofA Global Research - Analyst : And the last question would be given that there could be a lot of fiber players out there without wireless networks, guys like T-Mobile have said that they'd be interested in maybe looking at partnering and using their brand and capabilities there, is Verizon in the market to do that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 12:00PM, VZ.N - Verizon Communications Inc. at Bank of America Media, Communications and Entertainment Conference

Question: David Barden - BofA Global Research - Analyst : So you want to buy Frontier?

Question: David Barden - BofA Global Research - Analyst : Okay. That's a great place to leave it. Sampath, thank you so much for coming out. I really appreciate it. Thank you so much, everybody. Next up here, we're going to have Matt Mercier, the CFO of Digital Realty. Thank you guys for coming.