Hi. Thanks for joining us. Welcome to the second day of the 51st annual J.P. Morgan TMT Conference. I'm Phil Cusick. I follow the communications and media space here. We're happy to welcome Hans Vestberg. Thank you. Chairman, CEO of Verizon. That's correct. Thank you for joining us. Thank you for having me. I believe you have something you need to say. Yeah. safe harbor. I can say some things that might be future-looking, so- Right. safe harbor to all of you. All right. There we go. Ready. We're okay. Happy safe harbor. Happy safe harbor. let's just, you know, we talked last night and we've talked about 5G and technology for a long time. Yep. Maybe let's start with where we are there. Yep. we'll dig into some other parts of the business. Just where are we in that sort of 5G process that you're think about? When I think about a wireless era, it's somewhere between 10 to 12 years. They usually have three different phases. The first phase is basically when you deploy the technology. Takes some three to five years. The second part is where you start doing innovation and start on new things, and you get advanced on that technology. Then you have the maturity of it. You can say that 4G is in the maturity right now here in the U.S. 5G is coming into the second phase, where you actually start doing 5G-Advanced and actually start taking advantage of all the 5G out there. That's where we are from a technology cycle, and that's why you see... I'm not sure how deep we should go into, but you see things like Network Slicing coming up. You see new applications that can be used in 5G, especially for enterprises. For some of you might remember from the beginning, the design of 5G was very much to see that also enterprises could actually use wireless as their main source of communication, which historically has been other. That's why you have low latency, enormous throughput. You can connect 1 million devices per square kilometers, which was never the case with 4G. That is all happening right now with 5G-Advanced, Network Slicing, core networks that can handle 5G and all of that. That's where we are. I predict that the next 5 years is the second phase, where we're going to see more innovation. We have already seen on the business side. I think consumer side, even though it's not imminent, but the next five years we're gonna see more on the consumer side from 5G. I think 5G suffered somewhat from high expectations early on that didn't really play out. As any wireless technology. Exactly. There is a lot of value of 5G in the business today. Oh, yeah. How should we think about what 5G is generating for you today, and then how that evolves in the next few years? The whole idea for us when we built our network was that from the data center to the edge of the network, we holistically build that with unified transport, with one fiber in between everything, multi-routers, in order to have one stable base in the middle. At the access point, we basically, we provide with 5G or fiber or whatever it might be. Already today we see several use cases on the 5G spectrum we have. First of all, consumers, you know, how many of our customers already today have 5G devices. We have plans that include the 5G Ultra Wideband. Of course, the killer application today is Fixed Wireless Access. I mean, we use the same technology, same radio base station. It's not a separate network. Almost 400,000 in the first quarter, new subscribers on Fixed Wireless Access. That's definitely the killer application. That's not only for consumers, it's also for businesses. Retailers, SMBs are using that as a primary tool for broadband. The last piece that we are now seeing as well is private networks, where we actually use our license spectrum to build private networks in logistics centers, or it could be big grocery stores, could be factories, it can be offices. All three of them are now happening. We talked about them from many years ago. They're all three happening, and they're built on the same infrastructure. Basically I have three business cases on the same infrastructure. That was the whole idea of the strategy, to see that we have the best return on investment on the capital we invested in the network, to see that we have as many use cases and as many connection as possible on one invested network. We've talked about fixed wireless is clearly on its way. Not there yet, but being a billion-dollar business. Yeah. What are the other pieces that we're gonna see sort of next? Are the other things... You've talked about private networks and things like that. Are those in that five-year period- Yeah. headed to being billion-dollar businesses? Definitely. The private networks is now slightly starting with 5G private networks. When you have a private 5G network, you can, in the next step, put in Mobile Edge Computing, meaning cloud services at the edge, which we're partnering with all of them, all the three big ones. That's the next step. You start putting application at the private network. It's a journey. It's a solution-based journey with the business to business that takes some time, but clearly we're clearly in the lead. We were early out with it. We built all the technology together with some of the largest cloud-based companies in the world. I think that's a journey. We are long-term. That's why we built the network. That's why we bought our spectrum, in order to see that we can monetize it in different ways. Private 5G networks is just a slide in to get in, and then you start adding on that security, Mobile Edge Computing, it could be virtual SD-WAN and things like that on top of it. You know, where I'm trying to get to, and I think what investors' concerns are. Sorry It's okay. Never turn off the phone, you know? Right. Me too. I think what investors' concerns are is that this is a mature business, that wireless is a mature business, they look at consumer and postpaid and what's gonna happen and all the competition, what I'm trying to think about is what is the sustainability of the wireless business in aggregate. Mm ... and being driven by all these other things? I think the sustainability of the wireless business is one of the most important infrastructure you have in any country in our society today. I mean, I think being in wireless is probably the best thing you can be. I mean, mobility, broadband, and Cloud services are the 21st century's infrastructure. That's gonna be in every man's, lady's hands over time in order to be part of our society. No, I don't think. It might be maturity because everybody has a mobile phone, but innovation's gonna continue with wireless technologies, everything from Fixed Wireless Access, Mobile Edge Computing. We're gonna see slices on the wireless network in the future where you can think about other slices that is not intended for a device, meaning a mobile device. Could be something else that is receiving the wireless signal. Yeah. I think what I'm trying to think about is given the what generally has been a lack of excitement about wireless by investors for the last couple of years. Mm-hmm. I'm trying to think about whether we're in this sort of stable and we can maintain a, let's call it, low single digit growth industry, or is there a resurgence in growth coming that could really get people excited? What do you think? I think it's a lot of excitement. I think there's a lot of opportunities in wireless. I mean, there's no other industry I would like to be in. I mean, this is an industry that will continue to evolve, and actually bring new opportunities for everybody involved. No, I think definitely. We saw the same. It was a little bit different with 4G, but it was a little bit same in the beginning, so what you gonna do with it? Why do you need this? Especially on the consumer side, a lot of doubts. Of course, we still had on 4G an unpenetrated market. There were people that didn't have a phone, but it was same questions, and then we suddenly saw, wow, this is what 4G can do. I think the same with 5G, and still you're asking what is the killer app. I mean, I added 400,000 Fixed Wireless Access broadband subscribers in the quarter. And when it comes to our C-band that we bought two years ago, we only have gotten a fraction of it. We have gotten roughly in 70 markets 60 megahertz, and we have 160 megahertz in averaging more than 400 markets. We have just started it with these journeys. I think you should be really excited what we can do with wireless, and how we continue to build a very resilient, very strong network to handle all this traffic. We can see that we actually have innovation at the edge. You've spent the last five years building a fiber network underneath a lot of this mobile. Where are you in that process? I think we're a little bit underrated there on how much fiber we built since I came in. I think we were running for a while with 2,000 route miles a quarter on fiber. We have built it in all meaningful places in the country where there's a lot of traffic because my main concern from the beginning is that from the radio base station or from the edge, you need the fiber because all the data. That's why we built our own fiber, so we own its economics. We basically are now more in success-based fiber, meaning we have gone over the hump, but that goes back to our capital allocation that we talked about. Our CapEx is coming down right now. One of the reason is that we actually built a lot of fiber since 2016, 2017, and right now it's more success-based fiber where we see, hey, we can do a good return on investment here, so instead of building it ourself or we build it ourself instead of renting it, that's what we're doing right now. That's coming down quite a lot for us. More than 50% of all our radios have our own fiber, and then you would ask yourself, "Why don't they have the other 50?" Some of them are very rural, and fiber is not even needed there, so then you use mini links or you're actually doing backhaul with satellite. It's a piece of in between there where actually we have good rental fiber, it doesn't really make the ROI or the return on investment calculation worth to actually build our own fiber. We have come a really far way, and we're I think we're very underrated how much fiber we have built and how much fiber we have. Adding, of course, our Fios footprint where it's in this area where we're also having a great success. I'm really happy with our Fios investment. We are on year 20 or something on Fios, I'm not sure, but 17, 18. That's how long it takes, you know? We're adding first quarter or the fourth quarter probably 50,000-60,000 new subs every quarter right now, which is a great pace for us. Does wireless do better in fiber areas? Yeah. Fiber, yeah. I think that ultimately, in high traffic areas, where you have good technology, you do better in general. I've said it a couple times. If I look where I'm rolling out the C-band, number one, I get Fixed Wireless Access. I get broadband subscribers. Secondly, the step-ups from our customers, and the, and even sort of the, the growth sides are better where we have the C-band coming in. That's why I'm not sure if any of you are following all the press releases we're doing, but we're doing a lot of press releases because every ZIP code basically that we come out with C-band, we do a press release. It's partly because for you, but it's partly for our own organization because we work much more locally right now. We have decentralized our technology team. We're decentralizing our consumer team so they can take action locally because we have so much demand on Fixed Wireless Access. Our team needs to know, "Wow, now we have C-band. Now we can talk to local authorities. We can go out and market it. We have a backlog of people that have signed up for Fixed Wireless Access. Now we can call them, so proactively can work with them." That's why it's so important with the change in structure we're doing, at the same time, how we're now building the network. That's a good segue into consumer, where, you've changed your plans a little bit recently. Yes, Thursday. Help us think about the philosophy behind that price change. Was it a price raise? Was it a price reduction? What's the sort of overarching view? In general we spent a lot of time thinking about what's our next step. We worked with a Mix & Match for a long time, very successful. We also understood that the consumer sentiment are changing. We did a lot of research for quite a while. I mean, I think that we found three things. I mean, control was re-important for our consumers. Also value was very important, and simplicity. All these three together was very important for our customers, and that's why we launched the myPlan on Thursday last week, where it's basically you pick your network solution, and then you can take perks. Perks or discounted perks, where you can add in what you want per line. You don't need to have Disney+ if you don't want that in a family plan. You can decide we have different for different line. It's a much more flexible way of doing it, but we always have our overarching goal, which you would know, it's grow our service revenue and expand our cash flow and EBITDA. We, we wouldn't do anything that we see that opportunity, but we put more in the control in the hands of our consumers. Gone in a lot of research in this. The team has done a tremendous work. Just thinking about the back-end as well, if you have fewer plans, they're simpler for us. Also, our back office is much easier. Our customer care, it's much easier for the customer care. It's both efficient for us, but also efficient for our consumers. I'm really excited about that. I've probably been to I don't know how many stores I've been to since Thursday, talking to our field force and our associates in the store and how excited they are of the plan, et cetera. No, I think great work. It comes from a philosophy that I probably talk to you about 10 x, being segmented. This is a market where we have a great base. You see that you keep the base, but also that it can bring in new customers, and this is basically how it works. I want to take a couple pieces there. Yeah. One was you talked about increasing service revenue. Yeah. The headline price goes from, for a single line, $90 to $80, but it's gonna be higher revenue. Do you expect, I assume, people to take more than 1 perk? Yeah. We expect them to take perks, absolutely. That we have seen since before. I mean, all the inclusion plans we've done... Well, give some examples of what those might be maybe. The perks? Yeah. Yeah. The one perk is the Disney perk. Another is the Apple One perk. Third one could be roaming, international roaming perk. Every perk is $10, and you just click whatever you want. We also have a Walmart perk. We have nine perks today. Thinking about as a start of a platform that can be iterated over time, I can have other perks. I can have other network plans and all of that. Again, we're being in the forefront thinking about, customers being in control. But right now, all perks are $10. As my colleague and the new head of consumer said recently, in average, we should make some 30% margin on those perks in average. They're a little bit different, of course. We're not just distributing perks, which are not value to us. They're also accretive to us, as well as they're creating our service revenue. With the base of how the company's operating, that's leverage. It just falls down to the bottom line. You mentioned segmenting the base. There's a high-end plan and a low-end plan. Yeah. And so, um- At the start. At the start. Now you're gonna make this more complicated. All right. Verizon I've always thought of as a company that did phenomenally well at the high end and didn't really need to address the low end too much. How has that evolved in the last couple of years? We still do phenomenal well in the high end. We did not do so well in the low end of the postpaid last year. I think in the second quarter was probably a quarter where we did not perform well, even though we actually had more promotions than ever. Very disappointed with that. We moved into the second part of 2022, and we did a lot of changes, both how we invest with our customers, but also being more segmenting, having different models for different segments in the market. We came out with a Unlimited Welcome, for example, which is bring your own device, where we basically got the foot traffic into the store and our store employees so that our consumers get the right offering. That's how it evolved, but we didn't perform well. We have seen in the fourth quarter and the first quarter our growth sales is now coming up in the consumer. I think first quarter was up 11% year-over-year, so clearly we are on the movement right now with really good traction. Even our store traffic increased quarter-over-quarter last year. Definitely we see it moving in the right direction. We want to be financial disciplined, we're gonna grind this out. I mean, we have a great team that is focused on doing that every day, and myPlan is the next step in that. Is that 11% increase year-over-year, is that mostly coming from addressing that lower end segment? Partly, but also we bring in others as well, but partly it came from that team, from that segmentation we did. Of course we get. That's why you see also that our promotions has come down with. In the first quarter we had less of phone promotions, so, because we had that plan. It all plays into the overarching target. We have to continue to grow our service revenue and expanding our EBITDA and cash flow. Definitely, got the good foot traffic in the stores. We have a high conversion rate in the stores as we came out from the first quarter, and even as I reported, the team is doing a great job in the store. I'm excited to see what's going to happen with myPlan, because that's comes on the back end of all of this momentum we built up in the second half or fourth quarter last year and into the first quarter. Do you think that competition in the industry sort of changed and it took you a while to catch up? Can only say that we didn't perform well. I mean. Yeah ... there are many reasons we're not performing. We did not perform well on the consumer postpaid. We performed in every other area. I mean, ultimately, we created almost $48 billion in EBITDA last year, so it is relatively, but we didn't perform in net adds. Yeah ... in postpaid last year. Coming out from a very weak second quarter, corrected, made some price changes as you remember in the third quarter, with some churn, which was expected. Then fourth quarter, we got the momentum going, and then it continued into the first quarter. Yeah, it's probably all. It was not performing ourself, and then it was also, the competition has changed, and consumers has also changed. That's why we did all the consumer research and came up with what does consumer really want. They want the control, they want value, and they want simplicity. That was very much based on that as well. And then I think about the consumer investment all the way from media spending you're doing, and then you have promotions, and then you have below the line, as we call it, basically customer care, being able to offer discounts and when we have possible churners. That total investment is what I'm looking at constantly. I can actually see media going down and below the line coming up. Overall, we're managing that to be a smaller investment with the right offering and the best network. Right. Yet protecting the back book and not letting a lot of value leakage from there. Yeah, correct. There's been a lot of debate about what Verizon should do given the relatively high prices of the, of the customer base. Where is churn from that sort of really strong legacy customer base? Can you get that back down? I think we saw that already in the first quarter. We had during the quarter, the churn is coming down. I think with the myPlan is definitely that, I mean, all the research we have is basically if you have more than one service, meaning you have one wireless plan, then you have perks, or you have Fixed Wireless Access or Fios and wireless, the churn rate is going down. It's also playing in to us with this new myPlan to see that if customer they want to stay with us, they start picking all these perks and then they wanna they stay longer. I think our churn management has been really good. There were some decision we made last year of price increases because it was time for them, it was also incentives to our customer to move to other plans. We knew the churn would go up. It was a very conscious decision we did last year that flow in a little bit to this year. We are very, very accurate in how we do that work. That came through as you expected? Yes. Yeah. Yeah. Both the increase and also, the little bit elevated churn. We had a couple of your peers up here, and we talked about how for an industry where there's a lot of hysteria around competition, price increases went through pretty well over the last few years, from each of you effectively. The last few years, I think it was last year. I don't think this industry has increased prices since it started actually. Yeah. I think actually when I got the question after the second quarter, I said that this is the first time wireless pricing has increased since we started in wireless. An outright pricing. Yeah. Yeah, that's right. Yeah. No, I think that's worked pretty well. I also, again, I think that this is such a necessity for our society today, for you and me, for businesses, for government. I mean, wireless is such a necessity. That's why you see a fairly good resilience on the price increases, which of course is related to both that we have cost increases. The second is also that we want to get the incentives for customers to actually bring to new plans and being more accurate what they are getting from us. I wanna. Just one more on this topic, and it's, you and I have had this conversation before. Investors are tuned to pay for postpaid growth. Yeah. Yet that's doesn't necessarily isn't necessarily the best metric for driving value? How do you think about dialing the business to take your share or not in an industry that's. Yeah ... growing in phones, and yet creating value in other places? Yeah. You and I have had so many conversations about that. For a while, I basically told you that, "Hey, measure me on the service revenue because that's really what..." It's 100 of metrics is below that can support that. Lower churn, more net adds, whatever it might be, that is important in that and how I invest my money, so. Clearly you need to get new customers as well. It's shrinking how many people that doesn't have a phone and how many are switching. That's increasing. I would say the majority of the revenue growth will come from expansion of the existing customer base. Mm-hmm. That's how we see it. It's also a piece of it that will come from new customers, and that's why we have this momentum right now and how we work in the consumer business. Don't forget my wireless business to business, which is really performing well. I mean, we have been close to 150,000-200,000 in it for six consecutive quarters on net adds. That is really doing that. The consumer has been a little bit different. I think that we have said that maybe 80% of the service revenue growth is coming from sort of existing base and 20% from new customers. That's sort of the high level idea. We're finding out each other on the way here because historically I said that net adds is just one metrics. I need to manage many metrics. The only one that really makes a difference for us is the service revenue growth that falls down, so my EBITDA and cash flow is expanding because that's ultimately how I measure my team. That's how they're incentivized. they need to manage a lot of KPIs. You read my mind on the business side. Yes. It's been remarkably consistent. Thank you. We had a sort of a boom of growth from business over the last couple of years. Yeah ... during COVID, and now it seems- Yeah ... to be slowing down a little bit. How do you think about the sustainability of that market, both in terms of the market growth there, but also your position in it? We saw a little bit of the COVID growth, of course especially from governments, et cetera, on the wireless side because they remote schooling and all of that. Those disconnects came during 2022, I would say the first half and the second half of 2022. There's no pre or post-COVID benefits right now. We're now on a normal trajectory. We're very strong in every area of- You're through the sort of post-COVID churn? Yes ... period. Yeah. That's done. That's over. It's no now much. We had the CDMA shut down as well. Yeah. That had some implication. If you take that away, on the business side we continue to be the number one clearly in large enterprises. The same with SMB and government. We take more than our fair share. We have done that for quite a while. The team is doing great work. Here, the customers are evaluating the best network, the resilience, high quality, the security of the wireless network is enormously important for our customers. Then that we have a solution-based system behind account management, we have technical support behind that have worked for years and understand this and our customers. Now with Kyle taking over with his background, working with customers and technology, really excited how they can continue that journey. No, good. If you look at aggregate business, wireless and wireline- Yeah ... is that a growing market? Yeah, it is. Of course, the wireline decline that we're seeing, the secular decline on sort of legacy equipment like MPLS and all of that will continue. What we need to do is to see that we are actually taking out costs at the same level. Ultimately it's gonna level out, and actually it's gonna be additive for us. Right now, you have seen some of the last quarter, we actually have some growth in the business area in Verizon Business Group because the wireless business and the Fixed Wireless Access and fiber is coming up and actually offsetting the decline in wireline. That's the trajectory we have, and that will also fuel our ambitions for our better EBITDA over time. Let me make sure I understand what you said? Wireless plus wireline and fiber and everything else, that business is growing in revenue now. Yeah, I think we're just above the zero here in two quarters. Yeah. Yeah. You're cutting costs against that. Yes. Can aggregate margins in that segment expand as well? Yeah. Of course. If we can just see that the guy are doing a very hard work with transformation of the network, taking out cost all the time in order to be able to meet that decline in revenue. If they just start moving that, we're gonna have money coming, flowing to our bottom line from wireline. Then you grow your wireless fiber and all these Fixed Wireless Access, your new products, that should be additive to your bottom line. We have a long-term goal of 25% EBITDA. We still believe that's achievable. Kyle and team are working every day to get there. Okay. Let's talk about capital spending and the network you've been building. We talked about fiber. Yeah. We talked about 5G. you forecast that capital spending will start coming down next year and then be stable. Is that right from here? This year our guidance is $18.250 billion-$19.250 billion, coming down from almost $24 billion in 2022. We believe after this we will come to some BAU around $17 billion. Around $17 billion. That could be up and down. That's what we have in our plans. It's just that we have invested so much in order to make this network. We'd fiberize it, as I told you before, fiber is now more success-based. We have built out on millimeter wave phenomenally in all urban places. We're taking the traffic on millimeter wave. That's also coming down because we've done so much. We have more than 40,000 millimeter wave radios in the market today. 4G is coming down, we allocated $10 billion for our C-band the first three years, and that is exhausted right now. That's why we're coming down. That doesn't mean we're not investing in the network. We're investing a lot in capacity. We're doing new sites in the network. That's sort of the trajectory that we committed when we announced Verizon Intelligent Edge Network in 2017 when I was the CTO, that was that, "Hey, we need to invest here to get the resilient end-to-end from the data center to the edge that can actually handle all this traffic." We only need to invest in our capacity enhancing units in the future, and that's where we are right now. This is not only a promise to our organization, it's a promise to my shareholders as well that this is how we can do it. It seems like you've built a lot of network, both fiber, millimeter wave. Yeah ... C-band. A lot of capacity. that at the end of this year will be underutilized. Well, yeah, I'm gonna have a lot of capacity but, you know, usage are increasing. We always have been ahead of the curve. I mean, that's Verizon. I mean, we have the best network. We always are ahead of the curve, so we don't end up in any quality issues, and we're gonna continue to have that. Of course I get more spectrum at the end so I can even do more. We will continue to do that. Okay. with that free cash flow, you've talked about delevering the business. Yeah. The capital allocation is clear. Number one, we allocate to the business, and we talked about the CapEx, which is the main driver for our business investments. Number two, we want to continue to put the board in a position to increase our dividend, which we have done for 16 consecutive years, which is a fairly good record, actually. Me and Tony will continue to see that the board can do that. We're paying down debt as they fall due, because our debt portfolio has a really good cash interest expense today, given how great the team was doing. We will pay it down as they come, and as soon as we see that we come down to the thresholds we talked about, we're gonna have free cash flow to do buybacks or whatever we want to do. Okay. If we can sort of we got a couple minutes left. Let's just sort of sum up. We had a conversation a couple years ago. You know, I've seen each other a number of times. Yes. You're in a better mood today than you were. I'm always in a good mood. ...a couple years ago last. I'm always in a good mood, but I can be upset over things that is not working. Yeah. I think that what you're referring to, last year I wasn't really happy. We didn't perform well, so I was upset. I think I'm energized with the new team that is coming in. I'm energized with the momentum we're creating in basically all business we have decided to be in. We have divested everything we wanted to divest. We have bought everything we want to buy, all the way from TracFone and C-band. We have done a lot. Now is the fruits to come. I mean, now the team needs to execute. That doesn't mean we're done, we feel we're great or something. We can do so much more. Ultimately, it is growing the service revenue, and it's doing the expansion on the cash flow. I mean, that's ultimately the target we have for ourselves and for our shareholders. Clearly you're confident, but I think there's a feeling in this room and in this town that wireless is a bad business. The industry consolidation- Which is incredible. It's incredible. It's the best business you can be in. This competition is gonna make a problem. Just to add one more piece, what else can you give us to give that level of confidence to this room? No. Coming back to the wireless business, I think wireless business is something so important, and it's so sticky. I think that over time we have great opportunity to upsell, include more, if in the consumer side, just expanding on what we have now launched. On the business side, we have seen the importance of using wireless as a primary broadband, as the primary service for large enterprise and SMBs. I would say that gives me a lot of comfort going forward. I think the position of Verizon is great. I mean, we have the best network, greatest distribution. We're number one in everything we're doing. There's no way we're even thinking about leaving that position. The team is super geared, super excited over it, and we are incentivized to continue to be the number one in this market and in the world. It's a good place to stop. Yeah. Thanks, Hans. Thank you. Thanks, everybody. Thank you.