John G. Stratton – EVP and President of Operations

Need to grow revenue per sub

” And when we talk about the wireless business it’s really become a simple strategy of acquiring and maintaining the account and then growing the value of the account. As the market gets to a point of near saturation how do you expand the value within the account. And so things that are obvious like tablets and WiFi hotspot, we call jet pack type opportunities are evident. We’ll continue to look for those opportunities. More recently things like connected devices like smart watches and the like create some meaning — some sort of incremental value creation. But there’s other opportunities as well. We’ve built and created products that are now beginning to scale. So I look at in the telematics space, right. We have huge telematics to largest fleetmatics those are principally in the commercial markets right B2B. So we have spun a product out which we call HUM last year that now is creating some nice growth. So the chance to add devices of different types to tap the network is important.”

Unlimited is for peace of mind

“Data is going to be going through its own pace of evolution and what we saw here was there are those who want to consume high volumes of data and I would say that by and large the tiered plans that we have had in the market did a reasonably good job of covering the vast, vast majority of users in terms of their actual requirement. But there’s another element to this which became increasingly important to consumers which is the whole peace of mind factor, right. And so the predictability of the bill and not having to worry about it or if you have one line on an account that has a breakaway usage which is typically someone who’s 15 years old and just going, so the ability for us to care for that was a driver here.”

Ready to take on the competition

“Yeah, obviously as you said Comcast and Charter have signaled their intent to go forward. I know the guys from those companies have talked a bit about that. I think as we consider that play obviously they’re triggering their MVNO on the Verizon Network. So we don’t have a whole lot of information as who is appropriate, about their specific plans but certainly we’re ready to go. From a — we call reseller but from an MVNO standpoint that’s a business we’ve been in forever and it’s good business. So we’re happy to have it and in terms of the retail side of my company and how we would see incremental competitors in the market, look I think we feel pretty good about our ability to compete. What is our brand position, the state of our distribution and the like, all very solid. Competition generally is good for an industry, it brings and draws attention to it, and I think this has been a pretty dynamic market already. The addition of a couple more guys just bring it on, we’ll see how we go.”

Meaningful 5G deployment in 2018

“How do we work those aspects as well with the goal of being first to market in the U.S. with a meaningful commercial deployment of 5G which we expect in 2018.”

Mobile 5G in 2020

“I think what we would more likely see is maybe the end 2019 into 2020 where you might see the first sort of delivery of mobile based 5G. And remember also to scale you have to seed the base of handsets and so you’ll have that curve. There’s a cost curve, there’s an initial integration that needs to happen. But in the long run what we see in terms of the value there is that where the highest demand on these mobile wireless networks will occur is in the places that are most densely populated. Where 5G works best is those places where it’s most densely populated. For the mobile use case is a no brainer as far as we’re concerned. The detail of it is remarkable, the reinvention that’s required has surprised us. We believe that the work that we’ve done so far and I will tell you about RF design is a really critical point. We’ve run and managed and design these networks a certain way for 20 years and the 5G paradigm is completely different. I think that’s going to surprise some people.”

Virtualization of the network is a big opportunity

“Virtualization I mentioned briefly a moment ago is an area that is just in its early stages. We maybe a third of the way through the journey to full stage virtualization of the network which has significant implications to the cost to provision as we go. The ability for us to leverage things like unlicensed spectrum for example, to do self optimizing networks less touch as the network policy expands to more cells, you have to have the ability to manage it in an automated way. So there’s a huge level of effort that’s going on in that side of the business.”

Biggest shift in enterprise has been to the cloud

“Yeah, we’ve seen other trends in enterprise that are more to do with how large enterprise clients buy. And it’s virtualization no longer sort of needing to host everything in their own facilities, the as a service model, etc. That has been a huge shift in the last couple of years. We expect that to continue because it almost feels generational. The CIA you work with today has a different orientation and then the one that may have preceded him or her and that’s important.”

Haven’t seen anything yet in terms of growth from sentiment

‘ In terms of sentiment about broader growth and investment we haven’t seen it yet. I’m optimistic about some of the changes that we see more broadly in the environment but at this point in time there’s nothing really that’s quite happened yet. Tax reform is still a discussion, it hasn’t occurred, etc. So what we’ll be watching for very closely is as the environment shifts, if there’s a move to greater growth we’ll certainly look to be in a position to capitalize on that as it comes.”

Verizon Communications (VZ) Q4 2016 Results

Matt Ellis

We’re making investments on a 10 year horizon so it doesn’t matter who’s in office

“In terms of your second question, so look there is a lot of changes going on in DC right now. Obviously yesterday we saw the announcement that as you mentioned G pie and so that may have a number of impacts across the regulatory space but I think it’s just too soon to tell exactly where we are going to be. We look forward to working with the regulators for the CFCC or others. The other thing I would mention though you think about that we make investments for many years given the nature of the business that we are in. and our investment are focused on just who happens to be in office today. We make an investments so that for 10 plus years and I think our records stands for itself irrespective whoever the administration is run by and the regulatory regime they were effective and that will be continued to be how we focus on our investment. So I will say we look forward to working with the new administration and the new leadership and the FCC and we expect to continue to be competitive in whatever we environment we are operating.”

We’ve got some commercial scale pilots of 5G under way

“Yes. Thanks Mike so let me start up with 5G, so look we had a good progress in 2016 as we discussed throughout the year. We had a number of technical trials and labs go trials which we completed and so we have now moved on to the next phase of that which is some of these commercial scale pilots that are getting on the way right now in about ten different locations around the country. So we are very excited about the opportunities of 5G brings. And we will see how those trials go and we look forward to sharing progress with you on those as we move forward throughout the year.”

Lowell McAdam – Chairman and CEO

5G could change the architecture of the network to the home

“Well, so let’s be clear on what we mean by 5G, I call it wireless fiber. If you think about the way we deploy files today, we go fiber all the way into the home and then WiFi within the home. This will allow you to stop anywhere from 200 feet to a 1000 feet somewhere in that range we think from the home and then make it a wireless last leg into the home, and I think that’s going to be the predominant architecture for wireless service going forward. Obviously, if you have large multiple dwelling unit high rises, large businesses, you can take fiber the rest of the way in. Our plan is to offer 1 gigabit broadband service to them, and then over the top bundle, we could dwell all the way to a 300 channel bundle.”

We’re going to be 2-3 years out ahead in 5G

“So the devices are going to be extremely simple, it’s basically the kind of router that you have in your home only with a 5G chip in it versus the fiber conversion chip. So the time to market is greatly compressed for us, we don’t need to worry about handsets and tablets and mobility handovers and that sort of thing. That is the business case that approves 5G. So what happens with use cases around autonomous cars and tablets and those sorts of things that will be dependent on the standards bodies which everyone speculates to 2020. I think it might be a year earlier than that. There’s a lot more interest around those standards at this point. But at that point, we’ll be two to three years out ahead of competition on this sort of a deployment. Others are going to have to wait for that spectrum to be found, to be auctioned and as you see from the 600 megahertz auction process those can be elongated.”

See lots of opportunities to deploy capital

“Well, people always are waiting for us to say we’re going to reduce our capital and you do see some companies go way up for a while and way down for a while. Our philosophy has always been sort of steady state. If I stand up here and say we’re going to reduce our capital by a large amount that means we don’t see opportunity. And in front of us right now, not only with 4G densification, but 5G deployments we see lots of opportunity for this.”

Verizon Communications’ (VZ) Management on Q3 2016

Smartphones obviously going to be slower growth

“as we came into the year, we said that one of the top priorities we had was to protect our high quality base and that’s what you’re seeing. Look, we want to continue to grow from a net subscriber base both in phones, but as I’ve said before smartphones are going to be a slower growth for the entire industry as it gets more densified. ”

We’d do our agreement with Comcast again if we had to

“Obviously we’re under nondisclosure with Comcast on that agreement and the other cable providers, but look, I mean we knew what we entered when we bought the licenses back just several years ago. This is a wholesale agreement and as Lowell and I have repeatedly said, we would do the agreement today again if we had to. I mean, it’s a good agreement for Verizon Wireless. It is a good wholesale agreement

Big issue with 5G is scaling

“The big issue that still has to be answered quite honestly is the scaling of the technology. So for each small cell how much can each small cell deliver to how many households and still deliver a consistent 1 Gb of speed or some speed that is comparable to a broadband connection to the home. So that still has to be answered and we expect to do gain more knowledge around that in 2017 with the number of commercial trials that we’re going to launch. So at this point, that’s really all there is just talk about I’m from a 5G perspective.”

We haven’t reached any final conclusions on the Yahoo issue

“So on yahoo, look Lowell and Craig have both commented on this recently. So let me just reiterate what they have said. We are still evaluating what it means for this transaction. This was an extremely large breach that has received a lot of attention from a lot of different people. So we have to assume they will have a material impact on Yahoo. Lawyers had their first call yesterday with Yahoo to provide us information but as I understand that’s going to be a long process. So unless Yahoo comes up with different process it’s going to take some time to evaluate this. So until then we haven’t reached any final conclusions around this issue.”

Verizon Communications (VZ) Lowell C. McAdam on Q2 2016 Results

5G will essentially be wireless fiber

“Yesterday the SEC approved our lease arrangement with XO, so that we have a clear spectrum path toward 5G deployment, which like 4G, will be a game changer. I think of 5G initially as, in effect, Wireless fiber, which is Wireless technology that can provide an enhanced broadband experience that could only previously be delivered with physical fiber to the customer. With Wireless fiber the so called last mile can be a virtual connection, dramatically changing our cost structure.”

Consumers are accessing content differently

“At the heart of this video evolution are the changing ways in which younger consumers access their digital and mobile content. Over the past several years we have dramatically expanded the ways in which we can deliver content wherever and however the digital customer wants it”

Yahoo gets 1 B monthly active consumer views

“Yahoo’s operations provide a valuable portfolio of online properties and mobile applications which attract over 1 billion monthly active consumer views. It also brings market-leading content, brands, and sports, finance, news, and e-mail into the portfolio”

5G test results

“We’ve typically seen speeds above 1 gigabit over, let’s just say, 500 yards or less, because of the confined space that we’ve got available to us. With that sort of speed we’ve been able to put up six ultra high definition TVs, six virtually reality units, numerous tablets, et cetera. So and those services are only drawing in the 300 megs to 400 megs of throughput. So lots of head room.”

Francis J. Shammo – Chief Financial Officer & Executive Vice President

37% of postpaid base are on a payment plan

“During the quarter 5.2 million phones were activated on a device payment plan. In total we have about 31.8 million phone connections activated on a device payment plan, representing about 37% of our postpaid phone base.”

It’s a little too early to tell what the behavior of payment plan customers will be

“we have our first set of EIP customers coming up on their 2-year anniversary. And there’s not enough volume yet of those customers to really get a behavior track, if you will, whether they’re going to hold their phone and take a $20 to $25 discount on their bill or if they’re just waiting for a new phone. So I think it’s too early to tell. We’ll have a better feel for this as we go into the second quarter (sic). And that’s why in my prepared remarks, I said it’s too early to reforecast.”

Smartphone growth is going to be slow

“As far as the, how do we stimulate phone, smartphone growth? Look, I’ve been saying for over a year now that smartphone growth is going to continue to slow. And we have to look at other areas for that growth, obviously tablets being one. And we have a little bit of a headwind there.”

Tablets add value because we can push our content to the devices

“absolutely we view as tablets as adding value. So traditionally you would say, well a tablet that’s added to a Wireless account just gives you a minimal amount of access revenue. And that’s far less than a smartphone. And all that is true. But if you look at the entire ecosystem that we’re developing here, more people who have tablets, we know watch more video on a tablet. And if you think about what Lowell outlined on our whole video strategy, along with go90, AOL, Yahoo coming into the portfolio fold, we’re trying to drive more usage into these devices. And we want those users to consume our content, which then ultimately drives advertising.”

3M (MMM) Inge G. Thulin on Q2 2016 Results

Earnings up 3%, sales down slightly

“Looking at the numbers, earnings were $2.08 per share, up 3% year over year. Organic sales were down slightly, at minus 20 basis points. Our two domestic-driven businesses once again paced our company’s organic growth in the quarter. Health Care posted 5% growth, with positive growth in all businesses and geographic areas. And Consumer grew 3%, driven by strong performance in our Command, Filtrete, and Post-it products. ”

Electronics and energy declined in high single digits

“Organic growth in Electronics & Energy declined in the high-single digits, as we communicated during the second quarter. That business continues to be impacted by weaker demand and elevated channel inventories in the consumer electronics market.”

UK is only a small percentage of sales and we have regionalized in Europe anyways

“Well, this is Inge. So, first of all, UK for us is less than 3% as an enterprise in terms of revenue. And we had a very good result this quarter in West Europe, as you saw, with 3% organic local currency growth with all business groups growing, which is very, very nice to see, to be honest. So we had Industrial at 3%, we had SGBG 2%, we had Health Care, 5%, we had EEBG 5%, and we had Consumer 2%. If you think about Europe and put that in perspective with what we have to do, there’s no reason for us to change strategy around Europe. Our strategy has always been to have localization in terms of execution based on languages. And, number two, build up a very strong backbone relative to resources what we now do with ERP.”

No need to change strategy based on Brexit at all

“There is no reason for us to change the strategy in Europe based on the outcome of the Brexit. No reason for us to do that. The other thing that is very nice for us to see is the margin expansion that is coming for us in West Europe as well. ”

The electronic business is a good business for us to be in

“the Electronic business is a good business for us to be in. We’re a material science company and the strengths of our capabilities in that market is very, very strong. So from a strategic perspective, there is no question mark for me. And when you look upon the four fundamentals that we have in the company in terms of technology, manufacturing capabilities and geographical reach plus brand equity, it’s very, very good for us.”

Lowell McAdam – Chairman and Chief Executive Officer

You have to be the best at the connectivity layer

“As I look across my career, you can’t be good at the upper stack things if you aren’t the best at the connectivity layer. And I think we’ve shown with our FiOS platform and with our wireless platform and we have a campaign, ad campaign running now Better Matters to customers whether you look at your ability to have pricing power, whether you look at your loyalty numbers which are very strong for us and have always been very strong. Being that leading edge of technology opens up a lot of doors and helps to take care of customers, so that’s why we feel as strongly as we do.”

5G will enable high speeds into the house without a wire

“If you look at 5G in a fixed wireless environment, we’ve demonstrated for some of our shareholders in our Basking Ridge facility putting 1.8 gigs into the house without a wire. And if you think about that from a customer’s perspective if I can do that then the virtual reality all the other things 3D video conferencing, the whole nine yards. We all grew up watching in Star Wars actually might happen. So I think that’s what the consumer is going to see.”

I think go90 got overhyped

“I think we had always internally Phil viewed go90 as what we call patient money inside the business that we knew – because it wasn’t our core competency, we knew we’re going to have to build slowly in this area and the way I would characterize that we have seen enough success to make us excited about continuing to work it, but we didn’t believe and I think it did get a little bit overhyped and I’m sure we contributed to that to a certain extent. But we didn’t believe that it was going to move the needle on a $130 billion revenue stream overnight.”

We used to talk about IoT being a revenue driver in the late 80s

“So look we’ve been talking about IoT, I think we talked about this a little bit at dinner last night, back in the late 80s when I started to get involved in cellular we used to talk about IoT being a huge revenue driver. I finally think we’re on the cusp of that, but on the meantime the industry is exploded.”

The leap from 3G to 4G was a bigger leap of faith than 4G to 5G

“I think the leap from 3G to 4G was a bit more of a leap of faith than the leap from 4G to 5G. If you look at the pent-up demand around IoT at around video and around virtual reality and I don’t disagree with Mark Zuckerberg that virtual reality maybe five years or 10 years out before it becomes big, but think about if it becomes big what does that mean for industrial use, for enterprise use, for entertainment use. And when you can deliver this early in the process when you can deliver two gigs into a home with beamforming antennas – so there is another big surge coming.”

We have a 2 year lead on competitors

“There is no doubt in my mind and the competitors – look those of you that have been around since 1999 every one of those competitors has been two years away from catching Verizon. If we stood still, yes it might happen. Guess what we don’t stand still. So we’re going to lead on 5G and we will probably lead on 6G whatever that comes, but in the meantime there’s a lot of opportunity out there.”

Our customer base wants to maintain the subsidy, we’re not going to push them out

“our adoption rate of device installment has been in the high 60’s whereas others have been in the more in the mid-70’s and you know each percentage point is meaningful. But that’s what our customer base wants. They want to maintain the subsidy and so I’m not going to force them out of that. That transition does lower your revenue per subscriber and then it flattens out over time and then it rises back up again. We’ve watched the other carriers and what their curve looks like and we think we’re in that the trough of that curve now and beginning to move back up”

Francis J. Shammo – Chief Financial Officer & Executive Vice President

Millimeter wave spectrum

“During the quarter we announced our intention to acquire XO Communications, which will provide us the opportunity to deepen and expand our fiber assets nationwide, as well as to lease millimeter wave spectrum for 5G testing purposes with the option to buy.”

Top line declined by 1.5% excluding AOL

“If we exclude AOL, which was not part of Verizon a year ago, our top line revenue declined by 1.5% for the quarter. This was due to lower wireless phone activations under device installment sales, lower upgrades, and the continued migration of our customer base to unsubsidized pricing.”

Net phone additions were negative

“Net phone additions were negative 8,000 for the quarter, as compared to a negative 138,000 a year ago, a significant improvement over the prior year, driven by customer retention. Retail postpaid churn was 0.96%, down 7 basis points for the quarter and sequentially consistent. We have taken many actions to improve and simplify our customer experience and provide the best network, which have resulted in improved customer loyalty and satisfaction.”

Will shrink call centers through attrition as more people seek customer service in other ways

” other things that we’re looking at is around distribution centers and call centers. As you know, call centers are a very high turnover rate for employees. And with our decrease in calls coming in from our Wireless customers because of more online, more chat, more self-service, we will not hire as many customer call centers. And we’ll achieve this through our attrition rates just naturally within the call center. So there’s opportunity to reduce force just through the attrition rate.”

Didn’t need to reclassify broadband under Title II in order to ensure an open internet

“As far as Title II goes, look. I mean we agree with all the principles with net neutrality rule. The thing that we disagreed with and opposed was applying Title II to broadband services and particularly wireless broadband. So we’ll have to see where this comes out. But in re-classing broadband under Title II was not necessary to ensure an open Internet. I mean there has been nothing ever that shows that it not has been an open Internet.”

Expecting churn to flatten out at this slightly higher level

“So you saw this 7 basis point increase in churn for the last couple of quarters. What I would say though is, is if you look ahead, last year second quarter, the churn was like a 0.90%. I would not anticipate nor should you anticipate that we will achieve that churn rate again, because things have kind of flattened out now. So I would look at the first quarter as a guide to where we will be for the rest of the year from a churn perspective. And part of that is, is because we are seeing some increased churn on tablets, which we have talked about before, where we gave a free tablet away. And we saw that the customer base just didn’t see the value of that tablet when it was free. And they signed up for the 2-year agreement, because they got a tablet for $10 a month, so $240. And they disconnected it at the end of the agreement.”

We’re taking a different strategy with mobile video than bringing in home video out of home

“The other thing is, is there’s confusion out there on the video side, which is, everybody wants to talk about taking in-home video to a mobile handset. And this is something new. This has been done for the last 2 years. Everybody who has an in-home subscriber, most rights give them the ability to view that content as long as they subscribe and authenticate to that subscription, they can watch that on their mobile handset.”

“We’re taking the – really the strategy in a whole different – in a different mode. We’re going to a mobile-first strategy outside the home. It has nothing to do with in-home content. Now some of the content you could watch at home could be on this for like sports. That has been very popular in the go90 environment. But we’re looking at a lot of different mobile first, short clips, news, sports. And if you think about it, original content.”