The operator welcomes participants to the Verizon Second Quarter 2024 Earnings Conference Call and introduces the host, Brady Connor, who is joined by CEO Hans Vestberg and CFO Tony Skiadas. The Safe Harbor statement is mentioned, along with the use of non-GAAP financial measures. A detailed review of the second quarter results is available on the Investor Relations website. Hans Vestberg mentions the launch of a brand refresh that goes beyond a new logo.

Verizon's brand transformation reflects their commitment to providing choice, value, and control to customers. Their second quarter results show strong performance in wireless service revenue, adjusted EBITDA, and free cash flow. This is due to their innovative initiatives, such as myPlan and Verizon Business Complete, which have high customer adoption rates. Verizon's focus on strengthening customer relationships and delivering a good return on invested capital is driving their sustained growth. In the second quarter, they also saw strong performance in mobility, broadband, and network operations.

Verizon has seen improvement in their consumer mobility sector, with a 12% increase in postpaid phone gross adds and 148,000 total postpaid phone net adds. They attribute this success to their focus on providing customers with choices and value, such as partnerships with streaming services like YouTube Premium and Peacock. Additionally, their Verizon Business sector saw a significant increase in postpaid phone net adds, showing the importance of their services to businesses of all sizes. In the consumer value market, Verizon is seeing improvements in net adds and has recently relaunched Total by Verizon as Total Wireless, offering price guarantees and other features. In the broadband sector, Verizon continues to see growth and has added new contracts from large customers like the U.S. Department of the Navy.

Verizon frontline provides mission-critical connectivity and advanced solutions to over 40,000 public safety agencies. They have outperformed their peers in areas affected by natural disasters and are committed to expanding their reach through C-Band and satellite connectivity. Verizon's network capabilities make them a strong partner for the AI economy, with their mobile edge computing and fiber footprint enabling real-time AI applications. They are already using AI in their operations, such as routing customer support calls to the most suitable agents.

In this paragraph, the speaker discusses the company's focus on providing a superior network performance for their customers, which has been recognized by RootMetrics. They also mention their strong performance in the first half of the year, with improvements in postpaid phone net adds, consumer and business growth, and free cash flow. The speaker then hands over the call to Tony, who discusses the company's second quarter results, which were driven by strong operational execution and led to sequential net add improvements in various areas.

In the second quarter, consumer postpaid phone churn has improved significantly and is expected to remain flat or slightly better for the full year. Prepaid net losses were mainly due to the conclusion of the ACP program, but excluding that, there was a substantial improvement compared to the previous year. The business side saw a strong performance in postpaid phone net adds, with a focus on small and medium businesses, enterprise, and public sector customers. In broadband, there were over 375,000 net adds for the eighth consecutive quarter, and fixed wireless net adds were up sequentially, bringing the total base to over 3.8 million subscribers, a 69% increase from the previous year.

In the second quarter, Verizon saw an increase in consumer fixed wireless net adds and strong demand for their fixed wireless access service from small businesses and enterprises. Despite the effects of the ACP shutdown and lower move activity, Fios Internet net adds totaled 28,000. Verizon's broadband growth continues to outpace the broader market due to their superior network experience and strong execution. In terms of financials, consolidated revenue increased by 0.6% year-over-year, driven by service and other revenue. Wireless service revenue also saw growth, primarily from consumer wireless service revenue, which grew by 3.7% year-over-year. This was driven by consumer postpaid ARPA growth and the adoption of myPlan, which now accounts for over 30% of consumer phone lines.

In the second quarter, FWA revenue included in wireless service revenue increased by $200 million compared to the previous year. The FWA business is expected to generate over $2 billion in revenue for the year. Prepaid revenue declined by $162 million due to the shutdown of ACP, but the impact on wireless service revenue growth was minimal. Adjusted EBITDA increased by 2.8%, reflecting lower upgrade activity and cost efficiency efforts. Adjusted EPS decreased by 5% due to higher interest expense and cash flow from operating activities decreased due to higher taxes and interest expense. Capital spending for the first half of the year was $2 billion lower than the previous year.

The company's network build is ahead of schedule with C-band deployed on almost 60% of planned sites. Full year guidance for CapEx spending remains unchanged and free cash flow has increased by 7%. Net unsecured debt has decreased and the company plans to further reduce leverage in the second half of the year. The team's strong execution and operating momentum are translating into results, with growth and profitability being balanced. The focus for the second half of the year is to drive growth in wireless service revenue, expand adjusted EBITDA, and generate strong free cash flow.

Verizon is evolving its broadband strategy as it approaches 4-5 million fixed wireless access subscribers. The company is focused on scaling the business along with private networks and driving mobility growth. The ongoing C-band expansion will support these efforts and open new opportunities across markets. Verizon remains committed to a differentiated customer experience and operational excellence. The company will continue to invest in the business, support its dividend, and pay down debt. As AI continues to reshape the industry, Verizon is well-positioned to benefit from it. The company is excited about the future and believes it has the right assets and strategy for success. During the Q&A portion of the call, the first question was about the impact of ACP on the broadband side and if there will be any lingering effects on prepaid, postpaid, or broadband in the second half.

Hans Vestberg and Tony Skiadas discuss the impact of the AI phones and upgrades on Verizon's financials. The ACP program had a slight impact on prepaid and Fios, but Vestberg sees it as an opportunity. Upgrades have been low due to the quality of phones and disciplined promotions. Tony Skiadas provides details on the ACP updates, with 400,000 prepaid disconnects in the second quarter.

Verizon has seen minimal impact on their postpaid side, with some pressure on Fios gross adds. They expect some disconnects in prepaid and a small number in other products in the third quarter, with up to 50 basis points of headwind on service revenue. The margin exposure from ACP was insignificant in the second quarter. They will continue to update on this as they progress. On fixed wireless, they have strong momentum and are on track to hit the low end of their guidance by August. They have excess capacity and may look to monetize towers or other real estate assets.

Hans Vestberg, CEO of a telecommunications company, discusses their target of reaching between 4 million and 5 million fixed wireless access broadband customers. He mentions their commitment to improving cash flow and optimizing assets, but does not comment on rumors in the market. He also talks about their focus on capital priorities and their progress in the last quarter. In terms of the broadband market, they have seen consistent growth and have added 375,000 to 400,000 net subscribers this quarter. On the wireless side, they are confident in their ability to drive volume growth while maintaining pricing power and expect a healthy balance between volume and pricing over the next year.

The speaker believes that the company's offerings, including the recently announced myHome, make their business very strong. They have a competitive advantage with their Fios fiber product and fixed wireless access. The company has only deployed a portion of their capacity for fixed wireless access, leaving room for growth. The speaker is also excited about the volume growth, particularly in the consumer and business sectors. The company is on track to meet their revenue goals and expects to see sequential growth in service revenue in the second half of the year.

The speaker discusses the challenges in year-over-year comparisons in the second half of the year due to pricing changes in 2023 and the uncertain promotional environment. However, they feel good about their revenue performance and momentum in the business. They will not provide guidance for 2025, but their assumptions will carry forward. The next question asks about expectations for second-line contributions and service revenue growth. The speaker mentions positive net adds for 2024 and discusses the potential impact of HCL Tech Managed Services savings and a voluntary separation program on margins.

Hans Vestberg and Tony Skiadas discuss the impact of two items on margin and EBITDA growth expectations in the second half of the year. The second-line offering aligns with their strategy to build a strong network and increase profitable connections. They have also implemented cost-saving programs and plan to continue with investments and efficiencies. The second number business is highly profitable and they expect less contribution from it in the back half of the year.

The company expects positive phone net adds in consumer for the year without the contribution from second number, reflecting the strength of their core business. They are comfortable with the EBITDA guide and have made progress with margin expansion and cost transformation. They are on track with their cost actions and see efficiencies coming from AI. They are operating differently and feel good about the progress. In terms of pricing, the back book in wireless postpaid is likely lower than front book offers, and the company believes the pricing environment in postpaid wireless may start to resemble that of fixed broadband or video products.

The company has recently seen an increase in value for their offerings, which has led to a better balance between volume and value increases. They have also been successful in gaining market share in various areas, such as government, large enterprise, and SMBs. The company has introduced new offerings, such as myHome and Business Complete, which have been accretive and provided better services for customers. The company sees wireless as a key opportunity and plans to continue adding new services. They are confident in their back book and have taken pricing actions in the first half of the year. They are focused on finding a better balance between price and quality in the future, but cannot comment on any potential future pricing actions.

David Barden asks a question about the Q account number reported by Verizon, which is the lowest since 2016. He asks about the durability of Verizon's growth strategy and whether they need to see accounts grow to believe they are on the right path. Hans Vestberg responds by discussing the balance of P&Q and the high-quality customer base, as well as the strong performance in both consumer and business segments and the growth in fixed wireless access. The next question comes from Peter Supino about capital allocation.

Peter from the previous question asks Hans Vestberg about their capital allocation priorities and how they will balance investing in the business, paying dividends, and paying down debt. Hans responds by stating that their priorities have not changed and they will continue to focus on these areas before considering buybacks. They will also take into account market factors such as interest rates and share price. The next question from Craig Moffett is about Apple's potential to drive an upgrade cycle with AI.

Craig asks Hans Vestberg about the percentage of phones in Verizon's customer base that meet Apple's requirement for the iPhone 15 Pro or Pro Max, and how this will impact the company's upgrade cycle and margins. Vestberg mentions that a significant portion of their customers are already using newer versions of the iPhone and that they have a disciplined approach to promotions. He also expresses excitement about the potential for Verizon's network to support the growing AI economy, particularly in the enterprise sector.

The speaker discusses the potential for growth and business opportunities in the GenAI industry, as well as the company's plans for fixed mobile convergence and target leverage. They also mention their focus on improving their network.

Verizon has completed about 50% of its C-band initial deployments, with the remaining sites being rolled out currently. The focus is on customer satisfaction and revenue generation. The new features of 5G advance, such as SA and Massive MIMO, are expanding capacity and creating opportunities for revenue. The team is working quickly and receiving positive feedback on C-band. There have been improvements in churn and gross adds as a result of the initial C-band deployments.

In the paragraph, the speaker discusses the deployment of suburban and rural gross adds, which have seen a threefold increase, and the growth of premium mix by 10%. They also mention that nearly 60% of planned sites are now deployed with C-band. The speaker also mentions the use of stand-alone technology for AI/MEC applications and the timing of its nationwide deployment. They also mention the use of GenAI in mobile edge compute and its potential for use in customer and employee experience. The speaker also mentions a voluntary separation program that took place in June.

During a recent conference call, Tony Skiadas, the CFO of a company, was asked about the potential EBITDA benefit of a workforce reduction program that was announced in early June. Skiadas stated that the program is not yet complete and the numbers are not available, but savings are expected to be seen in 2024 and 2025. The company will disclose more information once the program is finalized. Another question was directed to CEO Hans Vestberg about the company's wholesale revenue, which seemed strong in the quarter. Vestberg did not comment on specific numbers, but mentioned that the company values its partnerships with enterprise customers.

The speaker discusses their strategy of building a network and creating profitable connections on top of it. They have a good relationship with MVNO customers and are comfortable with their arrangements. The speaker also mentions the potential for convergence between mobility and broadband and how they are well positioned with their assets. They have launched a new product called myHome and are satisfied with their consumer division's performance in the broadband and mobility market.

The speaker states that their company is the market leader and they plan to continue innovating. They also mention a reinvestment phase and the launch of a new product. They aim for EBITDA to grow ahead of service revenues in the next few years. They do not provide guidance for 2025 but their KPIs are focused on service revenue growth. In terms of wireless service revenue trends, they expect to see sequential growth in the second half of the year.

The speaker discusses the assumptions they made in their guide for the company's performance. They mention the pricing actions they have taken, an improving consumer volume profile, and the success of fixed wireless access. They also mention headwinds in prepaid and promo discipline. They feel confident in their service revenue and momentum in the business. The speaker also addresses free cash flow and the potential for growth in the second half. Lastly, they mention the growth of private networks and the potential for adding applications on top of them.

In 2018 and 2019, mobile edge compute was set up and businesses are starting to see the benefits. GenAI will further enhance this technology, but it will take some time for companies to train their data sets. However, Verizon is well-positioned to take advantage of GenAI and the potential revenue it will bring. In terms of free cash flow, the company remains strong and expects it to build throughout the year, with slightly more pressure from cash taxes offset by lower upgrades. Verizon plans to pay down debt in the second half of 2024.

This summary was generated with AI and may contain some inaccuracies.