Verizon 4Q15 Earnings Call Notes

Francis Shammo

Committed to returning to credit profile in 2018-19

“We remain committed to returning to our pre-Vodafone transaction credit rating profile in the 2018 to 2019 time frame, so overall, a strong, balanced 2015 which provides operating momentum and lays the foundation for the future.”

112m total retail connections

“We ended the year with 112.1 million total retail connections, excluding wholesale or Internet of Things connections. Our industry-leading postpaid connections base grew 4.4% to 106.5 million, and our prepaid connections totaled 5.6 million.’

We think there’s a big opportunity for us to advertise to our customers

“We believe there is a significant opportunity in using the programmatic platform with the data from the wireless customer base to connect consumers and advertisers in a very targeted and scaled way with relevant and engaging ad experiences while protecting individual privacy.”

In terms of cord cutting seeing more customers come in as broadband only but not seeing a big increase in video cutting

“On the cord shaving piece, as we said in our prepared remarks, we are starting to see more and more customers coming into Fios on a broadband-only basis, so just a single play strictly with broadband. As far as our current base goes, we see a little bit of trending but not much. Most customers are depleting the voice side of the product and keeping the broadband and video side of the product at this point.”

We’ll be at the forefront of deploying 5G

“We think ahead to 5G – as we said, we’ll be at the forefront and we are currently at the forefront globally talking about standards. We will be the first company to roll 5G out in the United States, and we’re currently preparing for those field trials.

5G may not just be about mobility

“The other thing I would say about 5G is we would hope that the FCC moves quickly to adopt the rules to facilitate 5G deployment. Think about 5G – it may not just be about mobility. It may be about other use cases, not just about mobility.”

Exploring data center sales to see if there’s an opportunity to move to higher returning assets

“On the sale of assets, as Lowell and I have continually stated, we will always look for opportunities. The data centers is an exploratory exercise to see if the asset is more valuable inside or outside the portfolio. I view that asset similar to the way we view towers – is there a way to monetize this asset that contributes value to our shareholders and gives us the capability to move that capital into higher returning assets for Verizon.’

Foundation of the top line growth story is the quality of our network

“we have to go back and start at the beginning on the whole top line growth story. So first and foremost, I think the foundation is our network, our strategy in densification, the use of fiber. Fiber is going to be critical with the densification, dark fiber. Ninety-two percent of our cell sites are already fiber-enabled, the other 8% are microwave, which probably won’t get fiber. So when you look at it, almost 100% of our cell sites are fiber enabled and every small cell, 100% of every small cell we deployed is fiber backed.”

More focused on building small cells rather than macro towers

“we continue to build macro towers but at a much slower rate than historically. Our focus is really around small cells, densified antenna systems in-building, but keep in mind that each of those small cells in-building and antenna systems all give fiber back to a main macro cell, so the macro cells still have an important role in how you deliver traffic into those small cells.”

Upgrades were down from 2014 because 2014 was a unique year

“2014 was a unique year. You have a very different form factor come out from Apple, which drove a lot of traffic to that iconic device. You continue to have innovation from Samsung and LG, but we didn’t have that huge change in the handset this year that we saw a year ago, so that, I think, affected some of the upgrade model. But you know, when you look at it, we still did about 1.5 million more upgrades in the fourth quarter than we did in the third quarter, so the volume of upgrades still increased, it just wasn’t what it was a year ago.”

It’s too early to tell if customers are upgrading more slowly on installment plans, but my own opinion is they probably wont change

“for our base it’s too early to tell because the first generation of them are just starting to mature. Until I get some real factual data on that, it’s hard for me to answer. My own personal opinion here is that if you look at history, a third of your customer base upgrades every year. I don’t see that changing, regardless of what plan the customer is on.”

Claiming to have surpassed their internal expectations for go90

“I will tell you, internally we have surpassed what we thought we would have at this point in time. We have set higher targets for ’16 because we need to build the viewership in a much quicker fashion…So I think when you put this together, I think the top line will start to reflect some of the things that we’re looking for, but it will create bottom line pressure. These will not, especially Go90 will not be profitable product probably within a one to two-year horizon right now. When we launched it, we said two to three, but it’s probably two years before that will become a profit contributor to the enterprise”