Sprint (S) at Deutsche Bank Notes

Sprint’s marketing message: why pay a lot more for a network that is only marginally better?

“And so we’re very pleased with that campaign, because what it actually pointed out is that there isn’t much of a difference between network performance today. We don’t profess to have yet the best network but we do feel that our network is good and certainly does not justify a very large premium that the competitive providers are actually charging… we shifted the messaging to say why pay more. And this started to resonate with consumers in the United States” Tarek Robbiati – CFO

 

Network is the number one cause of churn

50% of the reasons why customer churn are network related. 30% to 35% are price related and 15% to 20% are service related.” Tarek Robbiati – CFO

 

CapEx is lower presently because Sprint is benefiting from its historically high CapEx

“We spent and historically Sprint has had the highest CapEx to sales ratio of the industry. With Network Vision we spent a fair bit of money modernizing our tower infrastructure. And so we are still benefiting from that historic investment and this is really a positive walking into fiscal year ‘16 and that’s why our CapEx in part was lower in the first quarter of fiscal year ‘16.” Tarek Robbiati – CFO

 

CapEx is also lower because small cell installation is far cheaper than towers and other previous infrastructure

“The cost of those cell sites, small cell site is a fraction of the cost of the towers. So it depends on how many cell sites you need to build in every geography but a cell site is on average costing 20% the cost of a tower. So you need to spend less per small cite as you roll out some of them. So the spend is more scattered over time because of the permitting and the unit dollars that you spend are lower and the two effects combined explain why we guided the market towards the 3 billion mark for this fiscal year. We said less than 3 billion.” Tarek Robbiati – CFO

 

Sprint wants to utilize multiple sources of financing going forth

“It’s important for us that we have a diversified financing strategy. And so we will use different types of source of financing whether it’s high yield, whether it’s asset backed lending or others that I’m not mentioning but — to continue to finance our operations. And that’s really important because now that we have shored up liquidity we’re paying more attention at lowering our cost of capital and lowering our cost of debt. We pay every year around $2.3 billion of interest expense. It’s a very high number and it stands in the way from us becoming pretax positive. You know, it’s not talked a lot about in our – by the analysts who follow us but we do have a fair bit of operating losses on our balance sheet that we would like to monetize and realize the value for. We have $19.2 billion of notes at the end of the first quarter… It’s really important that we have sufficient liquidity to repay them and it’s a gradual process that we are embarking on incremental over the next several quarters to reduce our cost of debt.” Tarek Robbiati – CFO

Verizon Communications at Goldman Sachs 2016 Notes

Consumer wallet spend on telecommunications has not changed for 20 years

“So, if you look at consumer wallet spend, consumer wallet spend on telecommunications products, and telecommunications products includes cable, wireless, and telephone. It really, the percentage of spend by the consumer has not changed for 20 years. It’s around 4% to 5%.” Fran Shammo – EVP & Chief Financial Officer

 

Working advertisers into the consumer-data consumption model is key for VZ

“in the wireless world, we know the consumer is going to hit a certain peak, where they say, I just can’t pay for the consumption of data anymore. So we created this model that said we need to be able to deliver data through the network and have someone else pay for it other than the end consumer… That’s why we purchased AOL. That’s why we looked at Yahoo, because at the end of the day in order to make that model work, you need to have the viewership in order for the advertisers to sell to.” Fran Shammo – EVP & Chief Financial Officer

 

Free iPhone 7 promo may or may not continue past the end of the month

The question, though is, when those promos end, and of course, the market right now is saying, they’re going to end at the end of the month, does that continue? And quite honestly, I don’t know the answer to that yet. Fran Shammo – EVP & Chief Financial Officer

 

Because the iPhone 7 promo deal doesn’t apply to the secondary market, it has minimal to no impact on VZ

“the trading is only on the iPhone 6 and the 6 Plus. And those phones really have not been available in the secondary market. So, as we collect these phones and we go to the secondary market, that value of that phone, I will tell you on average is somewhere between $320 to $400… now you’re down to a $250 number… So for us at Verizon, I will tell you, this will have no impact in our margins for – especially for the third quarter. I can’t really talk to the fourth quarter, because I’m not quite sure yet what volume is and what other promotional activity will come out. But here sitting at the third quarter, this will really have no impact on our profitability for the quarter. So from this perspective, this is just another promotion. It’s to stimulate the marketplace, but from a mathematical perspective, it really has no impact to us.” Fran Shammo – EVP & Chief Financial Officer

 

No company has more than a single-digit share of the IoT market

If you look at the industry itself, I mean, from a market share standpoint, there really no one owns the market at this point, it’s all single-digit market shares… It also sets you up down the road when you have smart city, autonomous cars, it sets us in a premier environment to be able to deliver those solutions. Once they’re solidified, which I think will take a couple more years before we get there. So it puts us in a really great position in that segment of the IoT marketplace. Fran Shammo – EVP & Chief Financial Officer

 

VZ’s brand rests upon having the best network

I’m going to speed into the 5G world in 2017, and it’ll be just similar to LTE as far as I’m concerned, where we get a leap on all of our competitors. So we’re moving forward. I mean, at least, two of our competitors are still trying to deal with building out their LTE network. I mean, that’s like five years ago already… They’re still dealing in the LTE world. I’m dealing in the IoT world, smart city world, telematics. So I’m moving ahead and they’re still talking about how great their network is in LTE So, look, every drive test proves it, Verizon Wireless has the best network. We’ve built our brand on that. We’re not going to lose that and we’ll continue to move forward. Fran Shammo – EVP & Chief Financial Officer

Sprint (S) at Goldman Sachs Conference 2016 Notes

Every employee has been given equity based incentive, that triggers only if the stock price reaches $8

“Every single employee — over 30,000 employees, we did 30,000 grants. So every single employee has the exact copy of what I — of my incentive package, meaning no equity until the stock hits $8”. Marcelo Claure – President and CEO

 

Prime families are the ideal customer

“Now just putting perspective, a prime customer will stay with you about two and half times more than a subprime customer… And if you could capture that which is what we want, prime families that come more than individuals with a single line, you start seeing the business provide a very different customer life value and profitability changes.” Marcelo Claure – President and CEO

 

Wireless communication industry is aggressively competitive

“I think we’re living in a pretty competitive environment. If you look at Verizon’s advertising, it’s turned a bit aggressive. They hire people to talk about the Sprint network and for also you would be following Verizon, they have not done that I think.” Marcelo Claure – President and CEO

 

iPhone war results in free iPhones

“There is once a year where there is a big launch of iPhones and we all try to basically put up the best offer. I think this year, we are very little creative. I think we all went with a free iPhone. So therefore there is no competitive advantage. So it’s interesting to see Verizon and AT&T react fast” Marcelo Claure – President and CEO

 

Consumers are confused by data plans, and prefer a fixed bill

“And the vast majority say, give me one bill, with a fixed amount that I don’t need to try to figure out how many gigabytes, how many megabyte — maybe you guys are smarter than me, but I don’t know how to use a gigabyte. I don’t know what it really means” Marcelo Claure – President and CEO

 

After years of bashing, PC Magazine gives Sprint some favorable coverage

“I thought the editors of PC Magazine really hated us, they were bashing Sprint for years and if you read PC Magazine today, they have done an awesome piece that basically shows why, yet Sprint is not better than Verizon yet, but we are the story. We’re the comeback story. We’re more reliable than Verizon in certain markets. We’re faster than Verizon in other markets.” Marcelo Claure – President and CEO

 

Sprint believes it has a cost advantage in network structure

“Every single structure comes into a control tower in which we basically figure out what is the most cost efficient and the fastest speed that you can deploy a structure…. We believe that we have a competitive advantage in how we’re deploying our network and what is our cost to basically put a new gear and what’s our cost to operate a network that we feel is not being good but just basically exposing our plan. It’s very different than the way our competitors have deployed networks.” Marcelo Claure – President and CEO

 

Building a network is no longer extremely expensive

“Look at our network today, it’s the lowest CapEx. Now as we densify our network, yes we’re going to increase our CapEx and yes we’re going to increase our OpEx. But never to the tune of the way it’s been done in the past. There is way too many new technologies today. We have way too much spectrum and we’ve been real smart on how we deploy our network.” Marcelo Claure – President and CEO

 

Smaller companies like Sprint favor net neutrality, while its bigger competitors oppose it

“Sprint was the first one that endorsed net neutrality because we believe that when you’re a smaller company, it is not such a bad thing to have the government look over and in many competitive practices that or bigger competitors do.”Marcelo Claure – President and CEO

 

Sprint plans to use its spectrum to get financing

“We have a lot of spectrum and we’re right now — our goal would be that before the end of the year we’re able to potentially basically be able to use spectrum in order to finance the company.” Marcelo Claure – President and CEO

Verizon Communications (VZ) at Bank of America Merril Lynch 2016 Notes

VZ’s plan for AOL and Yahoo is to create a consumer brand company, in contrast to Facebook and Google’s emphasis on social

Yes, I would say just again super high level is, there is two strategies that it won’t work. One is basically anything, but Google and Facebook strategy overall. And the second one is copying Facebook and Google. So, I think, we were successful at AOL, because we chose a very clear gap in the market, where there was opportunity and we invested against it. I believe there’s a gap in the market that’s bigger than we’ve got AOL. And I – with Google search and Facebook is social, I think, we will be the brand company that essentially builds brands, builds consumer brands, but also on the B2B side helps other people build their brands. And the gap in the marketplace are the following two places. Tim Armstrong – Chief Executive Officer, AOL

 

VZ is going to become a brand company by providing a different set of tools, data, and metrics

We’re coming to them with a different set of metrics, different set of data, and different set of targeting criteria around content. And that allows us to have a differentiated place in the marketplace. And then number two is, in a lot of cases, where search and social have gotten tremendous traction, and they’ve done a very good job with that overall.

A lot of the dollars that have lagged behind or in this brand space and that’s where we’re working on a number of things, I think, are super innovative that will be done at the end of this year and into 2017, that will allow us to kind of push new types of metrics and opportunities to those customers overall. So, I – the easiest way to think about us is, if there’s search and social we’re branded. Tim Armstrong – Chief Executive Officer, AOL

 

There is a $90 billion new market coming over the next four to fives years in mobile and mobile video as 3.5 billion more consumers connect

You have a near-term opportunity over the next four to five years of about $90 billion of new market opportunity, just in mobile and mobile video alone. So, if you woke up today and said, hey, the size of this total pie there’s going to be 3.5 billion more consumers that could connect to this network, so there will be 7 billion people connected by the early 2020s. There’s a 90 billion near-term opportunity. Tim Armstrong – Chief Executive Officer, AOL

 

Google and Facebook dominate their market, but there is a clear market space for helping consumers find new customers

“where we come in as we help customers find new customers overall, and we help people measure, how do you find new customers. And that’s a very, very important, I’d say, strategic different lens into the ad marketplace than Facebook and Google are doing.

Again, Facebook and Google are way above us. They’re executing very well. But for the areas that we’re focused on, we think there’s a clear market opportunity for us in the ad technology and marketing space.” Tim Armstrong – Chief Executive Officer, AOL

 

Over a million people watched the Super Bowl on mobile

“But people said, hey, people won’t watch the Super Bowl on their mobile device. the reality is over 1 million people did watch the Super Bowl on their mobile device and it wasn’t everybody gathering around a big screen in a bar or somebody’s house.” Tim Armstrong – Chief Executive Officer, AOL

 

VZ has invested substantially in sports, because sports draw consumers in scale and consistency like a religion

“You look at what the investments that have gone into Yahoo Sports and Verizon put into sports overall through the digital properties. Sports is one of those things that is in a key part of people’s time, many times it’s on the weekend… You’ll see normal human beings during the week put on different clothing and go to a soccer match or a football match for those things. And the same – it’s almost a religion overall… if you went out all the middle schools or high schools in the country and you asked all of the middle schoolers or high schoolers to name every single player on the New England Patriots or name every single player on Manchester United, you would have a 90% percent hit rate” Tim Armstrong – Chief Executive Officer, AOL