Verizon Communications : Citi 2023 Communications, Media & Entertainment Conference Webcast transcript

REFINITIV STREETEVENTS

EDITED TRANSCRIPT

VZ.N - Verizon Communications Inc at Citi Communications, Media & Entertainment Conference

EVENT DATE/TIME: JANUARY 04, 2023 / 3:00PM GMT

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2023 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

JANUARY 04, 2023 / 3:00PM, VZ.N - Verizon Communications Inc at Citi Communications, Media & Entertainment Conference

C O R P O R A T E P A R T I C I P A N T S

Hans Vestberg Verizon Communications Inc. - Chairman & CEO

Kyle Malady Verizon Communications Inc. - Executive VP, President of Global Networks & Technology

C O N F E R E N C E C A L L P A R T I C I P A N T S

Michael Rollins Citigroup Inc., Research Division - MD & U.S. Telecoms Analyst

P R E S E N T A T I O N

Michael Rollins - Citigroup Inc., Research Division - MD & U.S. Telecoms Analyst

Good morning and welcome to Citi's 2023 Communications, Media and Entertainment Conference. For those of you I haven't met, I'm Mike Rollins, and I cover communication services and infrastructure for Citi. Since this is our first keynote, let me also take the opportunity to wish you a Happy New Year, and thank you for joining us for our conference today.

Before we get started, I'd like to mention that we do have disclosures available at the registration desk and on the Citi Velocity page from which we're streaming the audio. We're also going to work to incorporate your questions into today's session. (Operator Instructions)

And finally, continuing with the tradition of using our live surveys. They're completely anonymous. We're not tracking responses. We're just aggregating the results. You can access the live pool and Q&A, both with the codes that are up here, and there's placards around. I just encourage you to log in now, so you can get ready to respond to some of our -- where I hope are going to be some really good survey questions. And it's also available on the streaming site as well.

So with that out of the way, I'd like to welcome back Hans Vestberg, Chairman and CEO of Verizon; and Kyle Malady, President of Global Networks and Technology.

Hans, Kyle, thank you both for joining today.

Hans Vestberg - Verizon Communications Inc. - Chairman & CEO

Thank you very much.

Kyle Malady - Verizon Communications Inc. - Executive VP, President of Global Networks & Technology

Thank you.

Q U E S T I O N S A N D A N S W E R S

Michael Rollins - Citigroup Inc., Research Division - MD & U.S. Telecoms Analyst

Well, so we've turned the calendar to the new year. It always seems like a couple of days ago. So as you're now thinking about the year to come, can you just give us a high-level perspective of the strategy, the priorities? And are there any notable changes in your objectives from the past year?

2

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2023 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

JANUARY 04, 2023 / 3:00PM, VZ.N - Verizon Communications Inc at Citi Communications, Media & Entertainment Conference

Hans Vestberg - Verizon Communications Inc. - Chairman & CEO

First of all, we need to announce the safe harbor statement. Anything that Kyle might say, in fact, going to be forward looking and it goes for me as well so as you might be aware about that.

If you look into '23, I think a couple of things we're already changing. Kyle and I talked a little bit about our technology or not that is actually changing going into '23 compared to previous 5, 6 years. So we did talk about that.

When it comes to the other businesses. I think that, first of all, the mobility and especially on the consumer side, we have done quite a lot in the last 2 quarters as many of you know we were -- where I was not really happy with our performance at the end of the first quarter. And of course, then that trickled into the second quarter. We started to take actions in the third quarter being a little bit more agile moving into the softer segments that we had. We continued that work in the fourth quarter. So you're going to see us being more agile. You're going to see us being even more focused in certain segments.

Remember now, we are all the way from the lifeline with the Tracfone brands all the way up to the premium brands. So we're actually covering all the consumer segments. Our job is going to be even do smarter, more surgical actions in the different segments. You see that we retain our customers, but we also acquired the customers that we want to have, ultimately, with the goal of cash generation. That's number 1 for us. I mean we really think that it's super important in wireless revenue growth or wireless service revenue growth and EBITDA expansion or cash flow expansion. That's really where it boils down to. So you're going to see us be more on that side.

Then I think a couple of other things that we already have started emerging in '22, I mean, the national broadband, of course, both with Fios and fixed wireless access is really doing well for us. That's a strategy we outlined 5 years ago, starting to bear fruit right now.

The third quarter, you might remember, we had way over 300,000 new net adds on broadband. We continue with a good journey in the fourth quarter. Of course, I'm going to disclose the numbers when we meet in 3 weeks from now, but feel really good about that.

And finally, we start to getting the traction. We talked about private 5G networks, mobile edge compute. Maybe the deals are small, but this year, we're going to get a lot of deals and that's going to be a great base for our sort of platform for us to grow with enterprise customers over time.

So I think we have a strategy, but we're actually tweaking a little bit, being more surgical. I think, as I said, when we kicked off last year, we have all the assets, we have now this spectrum, we have the network. We have built the network for 5 years. We have Tracfone. We actually divested Verizon Media Group.

So we're much cleaner what we're doing, and on top of that, we're going to see us doing more cost efforts this year. We announced it in the third quarter. So yes, it's quite a lot of differences we're doing this year, but the core strategy is the same. It's more how we tweak it and go faster in certain areas and actually changed a little bit focus in certain areas. Maybe you should say something about the technology...

Kyle Malady - Verizon Communications Inc. - Executive VP, President of Global Networks & Technology

Yes. So consistent with what Hans says here, we're going to -- we're tweaking our build a little bit. So for the last bunch of years, we've been building a lot of fiber outside of our footprint as well as inside of our footprint. We've also been really bolstering our core network to handle massive amounts of data in the cores and been focused a lot on millimeter wave build. All 3 of those things are starting to come to the end of the build process, if you will, right?

So in our OneFiber markets, we are roughly 80% done with our core builds there. So now it's just a matter of hooking things up to it. Our millimeter wave, we're over 40,000 nodes. And now that millimeter wave technology turns into a tool for RF engineers to use in hotspots that they have and C-Band. So we continue to build the C-Band out. But the 3 major programs coming down and C-Band still continuing to roll allows us to take CapEx out of our program overall. So we're going to be less CapEx intensive going forward.

3

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2023 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

JANUARY 04, 2023 / 3:00PM, VZ.N - Verizon Communications Inc at Citi Communications, Media & Entertainment Conference

Then the other thing that the tweak -- the other major tweak that we're making and Hans said, it's getting -- we're getting more local. When we were doing all this build, it was -- we consolidated a lot of things so we could bring a lot of scale. Now it's really about optimizing, and so we're having -- we have a close focus at the local level along with our sales counterparts and the BU to make sure we're taking care of issues at a local level and servicing the customers in that way.

Hans Vestberg - Verizon Communications Inc. - Chairman & CEO

And you can say also that on the consumer side, as I'm also running the consumer business, we are doing the same thing. We are in a moment right now when we go more local with and executing more locally, both with branding, marketing, but also execution in hand-in-hand with our team in technology.

So this is a pivot for the next step for us, been centralized for a while, and now we go local as the network has come so far with the coverage. We're now more in revenue optimization, capacity enhancements, and we have built everything, as Kyle said, from the data center to the edge we've built now with fiber, redundancy, multi-edge routers. And now at the edge, we can decide what type of business we're doing with different type of customers. I think this was a dream that I had when I started at Verizon in 2017. We 2 drove up this Verizon Intelligence Edge network, and now we're there. And that's why we're also going to see quite dramatic reduction on CapEx.

And it's not because we're not doing everything we want to do, it's just that we have now built this. We still going to have, in 2023, a piece left of the $10 billion that we added when we bought the C-Band in CapEx. But ultimately, we're now coming down to a BAU that is pre-2015, 2014 levels in absolute number. And '24, we should be done with that. So we only have BAU.

So clearly, this has been a strategy for a long time. We have the best network. It's just going to get better with the work we're doing. And later this year, we want to get all the spectrum we need, 160 megahertz on C-Band, covering the whole nation. And in the first quarter, Kyle has not only promised, he has guaranteed, we're going to pass 200 million POPs on the C-Band as well. Isn't that right, Kyle?

Kyle Malady - Verizon Communications Inc. - Executive VP, President of Global Networks & Technology

That's correct, Hans.

Michael Rollins - Citigroup Inc., Research Division - MD & U.S. Telecoms Analyst

And just maybe finishing the topic on the BAU CapEx. So the goal -- remind us, the goal for -- was it 2024 BAU CapEx is?

Hans Vestberg - Verizon Communications Inc. - Chairman & CEO

Around $17 billion, somewhere there. That's where we're aiming for. It could be $17.5 million or something, but around that number is a BAU that probably is going to be the lowest capital intensity in the industry -- in the world when it comes to divided by the revenue.

And again, we have built a network that is so smart. That was the whole intention from the beginning. That will, of course, unleash capital for us. And cash flow, again, remember what we have measured on ourselves is the service revenue and the cash flow. That's really -- and especially going into this year, it's going to be even more important for us.

Michael Rollins - Citigroup Inc., Research Division - MD & U.S. Telecoms Analyst

And so maybe just rounding out one more part of the discussion on this. While we're just talking about CapEx and investment, what are the things that could cause you to want to spend more than BAU CapEx in the future? Is it to go more fixed wireless, bigger, broader? Is it more fiber? Are

4

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2023 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

JANUARY 04, 2023 / 3:00PM, VZ.N - Verizon Communications Inc at Citi Communications, Media & Entertainment Conference

there things, though, that are on the whiteboard somewhere where, okay, here's BAU, but here are things that we should just be mindful of that you might do in the future.

Hans Vestberg - Verizon Communications Inc. - Chairman & CEO

It would be something like when we did when we bought the C-Band. It has to be something that's very clear to the market why we're increasing. I think we have discussed this every time, and I will have Kyle helping me out here, but we have talked about the 4 million to 5 million fixed wireless access broadband customers as a goalpost for us. The network will handle that. We build it once. We use it once.

There might be many, many years out a conversation when, hey, do we split cells and do unique fixed wireless access solutions. That's not in the plans for the next 4, 5 years. But after that, it might be that we come back and say, "Hey, it's a great opportunity. We split 10 cells here because we can get more subscribers." I think that's going to be a great conversation, and it's going to be sort of success-based fixed wireless access as we do Fios today.

Kyle Malady - Verizon Communications Inc. - Executive VP, President of Global Networks & Technology

It will be -- I think it would be opportunistic, really, right? I mean, like we did last year, if you remember, we spent some money, and we opened up 30 more markets for C-Band past the 46 that we had. We were able to invest and clear those quickly. So now we have those launched.

So between now and when we get the full cadre of spectrum, if there's some opportunities like that, that allow us to accelerate and grab revenue quicker, then that's something that we'd absolutely look at, just like we do with Fios.

Michael Rollins - Citigroup Inc., Research Division - MD & U.S. Telecoms Analyst

So we'll jump into the consumer business in just a moment, but let's queue up our first survey question. So the first live survey question...

Hans Vestberg - Verizon Communications Inc. - Chairman & CEO

Yes, I (inaudible) with Kyle.

Michael Rollins - Citigroup Inc., Research Division - MD & U.S. Telecoms Analyst

Yes, you guys are...

Kyle Malady - Verizon Communications Inc. - Executive VP, President of Global Networks & Technology

We get to vote as well?

Michael Rollins - Citigroup Inc., Research Division - MD & U.S. Telecoms Analyst

You get to vote, yes. So we can get a placard up here. It's right up here. You could log in. And it should be visible now on our streaming site as well. I already see responses starting to come in. So the question is, what do you expect for Verizon's postpaid phone net adds in 2023? And the choices are less than equal to 0, over 0 to 500,000, over 500,000 to 1 million and over 1 million. So we're going to get those responses coming in. We're going to start talking about consumer. We'll get back to the results.

5

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2023 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.