Verizon at Deutsche Bank Conference Notes

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Fran Shammo — CFO

We think theres still a lot of growth potential in wireless

“if you look at the wireless industry, I know there’s a lot of — some negativism that it’s not going to grow in the future. But as you said here and you look at this whole environment, if you ever spent time at CES or World Congress, I mean you think about all of everything that’s being developed needs a wireless network to run over it and including Wi-Fi, but mainly some type of an LTE network. So, when you think about the growth opportunities around consumption of video in that environment, you think about all of the IoT and smart cities and all the applications that are coming that have to run over wireless network, you first look at an industry that says well, there’s still a lot of potential growth in this industry.”

Platforms are strategic priority because they are portable overseas. Platforms sit on top of networks

“The next piece of the strategic initiative is around platforms. So, our whole belief is we are developing these platforms. And the reason the platform is important, so when you think about Verizon Digital Media Services is a platform; the telematics is a platform; Go90 is a solution that sits on top of a platform. But when you look at platforms, these platforms that we’re developing can be taken outside the U.S. And so, they can ride over any network, but we can expand these internationally. So, the example I’ll use is telematics. We take the telematics platform for Mercedes and we’re actually their connect — not their connectivity, but their telematics solution provider in China. So, we can run these platforms on anyone’s network and the platform is where some of more of the economic value comes from.”

Solutions run on top of platforms

“And then on top of the platform, obviously we want to develop the solutions that can run over these platforms. So, Go90 is a perfect example of how we develop something that can run over the digital media platform.”

Go90 is a startup investment

“as we start to invest in some of these startups like a Go90, AOL, I mean these are really true startups for us. So, they create a lot of negative to the bottom-line, as truly a startup would. And that will continue this year. It will decline next year, but there will still be a drag on earnings next year and then three years out, will start to turn positive.”

We’re investing way more than our competitors who say they’re closing the gap with our network

“when you talk about closing the gap, I’m investing $12 billion a year. People who say they’re closing the gap are investing $4 billion a year. And then, we have people saying well 5G is not coming for any time soon, I don’t know why people are worried about that. That’s because they’re still trying to build out their LTE network. So, look, I mean, at the end of the day, everybody is going to do what they do. And our basis is, we will continue to densify, we will continue to invest in that network very heavily, because the user experience is going to be key.”

5G is here

“commercial availability is going to be all hinged on with the FCC and license spectrum grant. So, I mean, I think the industry could be ready to go in ‘17, because the technology is there. I mean the technology is operating in Japan and Korea; they’re building it out now for the Olympics. It’s delivering over 1 giga speed. So, the speed is there. What the trials have to prove out right now is 5G is a line of sight technology and point-to-point. So, what you need is you need a very densified network with small cells that can have line of sight to where you’re delivering that high speed video, if you will. So that’s what the trials are doing.”

“So, we believe that 5G is near term, not far term. And it’s going to bring a whole different dynamic to the industry. It’s going to give another growth pile — growth profile for this industry. So, we’re very optimistic with it.”

5G will be an overlay technology

“5G is not a replacement of 4G; it’s kind of an overlay to your 4G network. So, all the fiber we’re utilizing for 4G, all the small-cell in building antenna systems that we’re utilizing for 4G, 5G will just sit on top of that. So, it’s not going to be a capital intensive replacement technology, it’s going to be type of an overlay. ”

5G will not be in mobility at first though

“If you think about LTE, when we first launched LTE, LTE was not in smartphone; it was done through a dongle which most people bought to run their computers on and their laptops on and their tablets on. Then it matured into a chipset into the handset. 5G is going to be very similar. And at this point, there really isn’t many use cases for mobility with 5G, it’s more of a fixed point to point broadband delivery at high speed.”

Vision with Go90 is to produce 8-12 min content

“our strategy is very different than what I would call a legacy over-the-top strategy, because the legacy over-the-top strategy is nothing more than taking linear TV content, bundling it up differently and providing that through a broadband connection and having the customer pay for that. Our strategy is extremely different. What we’re after is we’re after content that is on average 8 to 12 minutes. Now put sports aside because sports isn’t Go90; that’s a different one. But the content that we’re really developing and some of the exclusive content we’re developing are episodic 8 to 12-minute clips because that’s what people watch on mobile.”