Verizon 2Q16 Earnings Call Notes

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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.”