Verizon 1Q16 Earnings Call Notes

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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.”