The paragraph is an introduction to Verizon's Fourth Quarter 2024 Earnings Conference Call. The operator welcomes participants and explains that the call will be in listen-only mode, with a Q&A session to follow the presentation. Brady Connor, the Senior Vice President of Investor Relations, introduces himself and mentions the presence of key executives, including CEO Hans Vestberg, CFO Tony Skiadas, Business Group CEO Kyle Malady, and Consumer Group CEO Sampath. Brady highlights the importance of Verizon's safe harbor statement and notes that the presentation includes forward-looking statements subject to risks and uncertainties, and contains non-GAAP financial measures with reconciliations available on their Investor Relations website. He also mentions that supplemental materials will be posted on the website. The call is then turned over to CEO Hans Vestberg.

The paragraph addresses the recent wildfires in the Los Angeles area, with Verizon actively working to protect and restore services and support affected communities and first responders. Verizon's network remains strong, maintaining essential connectivity. The company also reports successful financial and operational results for the year, including 3.1% growth in wireless service revenue and 2.1% growth in adjusted EBITDA. They added nearly 2.5 million postpaid mobility and broadband subscribers, with postpaid phone and prepaid net additions showing positive growth. The company achieved an industry-leading quarter in wireless service revenue and expanded its broadband market share, driven by fixed wireless access.

The paragraph highlights the company's achievements and strategies, including ending the year with over 12.3 million broadband subscribers and generating $2.1 billion in fixed wireless access revenue. They aim to reach 8-9 million fixed wireless subscribers by 2028, have secured contracts with major clients, and were recognized as a leader in private wireless services by Gartner. The business transformation resulted in reduced workforce and enhanced flexibility for strategic execution. Investments were made in offerings like myHome and Verizon Access, and strategic deals have been signed. They also raised dividends for the 18th year and reduced debt, achieving a net unsecured debt to adjusted EBITDA ratio of 2.3. Looking ahead to 2025, the focus will be on service revenue, adjusted EBITDA, and free cash flow. Wireless service revenue growth is expected to nearly double when promo amortization is excluded, with further details to be provided by Tony.

In the fourth quarter, Tony Skiadas reported strong operational and financial performance for the company, with significant growth in postpaid subscribers, including nearly 1 million additions across mobile and broadband platforms. The company saw a substantial increase in postpaid phone net additions, driven by both consumer and business segments. Prepaid net additions were also positive for the year. In broadband, they gained market share with 408,000 net additions, largely from fixed wireless access. The company exceeded its 2024 financial targets, with both wireless service revenue and adjusted EBITDA surpassing expectations, and expanded its adjusted EBITDA margin by 50 basis points. Wireless service revenue grew by 3.1%, and adjusted EBITDA increased by 2.1%.

The company reported a free cash flow of $5.4 billion for the quarter and $19.8 billion for the year, enabling debt reduction and positioning for a Frontier acquisition. The fourth quarter included $2 billion from the Vertical Bridge tower deal and $600 million in severance payments. For 2025, they project a 2% to 2.8% growth in wireless service revenue, driven by factors like improved consumer phone additions, pricing adjustments, and increased fixed wireless access. Revenue reclassification will shift $2.9 billion to wireless service revenue, impacting the growth base. Consolidated adjusted EBITDA is expected to grow 2% to 3.5%, reflecting higher wireless revenue and cost initiatives, despite wireline revenue pressures.

The paragraph outlines the company's financial and strategic outlook for the coming years. It highlights an expected increase in adjusted EBITDA by over $1.3 billion, with adjusted earnings per share projected to grow between flat and 3%. Capital spending is estimated to be between $17.5 billion and $18.5 billion, focusing on growth initiatives like C-band deployment, Fios expansion, and a fixed wireless MDU solution. Free cash flow is also projected to be in the same range for 2025, assuming no tax legislation changes. The guidance excludes effects from a pending Frontier acquisition expected to close by early 2026. The 2025 priorities focus on service revenue growth, EBITDA expansion, cash flow, mobility, broadband, private networks, 5G, and fiber, with an emphasis on operational excellence and financial discipline.

The paragraph outlines Verizon's AI strategy, which includes enhancing customer and employee experiences, personalizing products, and connecting to the AI ecosystem. The company uses AI tools like FastPath for efficient customer service and Segment of Me for personalized offers. Verizon is focusing on leveraging its fiber and edge compute assets to support large language models and generative AI as these technologies move closer to the network edge. This approach has already positively impacted the company's revenue and EBITDA, and they are exploring further opportunities in generative AI.

Verizon has launched AI Connect, a strategy and suite of offerings designed to meet the increasing demand for AI applications. This initiative leverages Verizon's extensive connectivity and edge computing assets to support AI workloads across multi-cloud environments, on-premises, or at the network edge. The company's significant investment in fiber infrastructure and their Converged Intelligent Edge Network positions them well to provide comprehensive connectivity solutions. AI Connect includes tools that offer customers more control and visibility over their network resources, enabling them to optimize AI operations according to their needs.

The paragraph discusses Verizon's strategic positioning in the AI ecosystem as demand for distributed computing increases due to the shift from AI training to deployment. With its extensive telco facilities and infrastructure, Verizon aims to be a key player in providing the necessary secure network connectivity for AI applications. As investment in AI infrastructure grows, Verizon's leadership in enterprise connectivity is expected to become increasingly crucial. The company is well-positioned with a large network of enterprise locations and partnerships with data centers, enabling the integration of AI applications across diverse industries.

Data centers are expected to face operational constraints by 2027, prompting a shift of workloads to the Edge. Verizon, with its network and facilities, is well-positioned to meet growing demands in AI, cloud migration, and colocation. The company claims a leadership position due to its available power, space, and cooling options across the U.S., as well as undeveloped land suitable for data centers. With agreements from major players like Google and Meta, Verizon is already seeing increased demand for its AI Connect offerings, contributing to improved margins. Partnerships with companies like NVIDIA aim to integrate AI with telecom functions.

The paragraph discusses Verizon's development efforts on the Edge within a private network and potential expansion into the macro network. They have formed a strategic partnership with Vultr, a global GPU service provider, to deploy GPU infrastructure in Verizon's data centers using their high-capacity fiber network. This collaboration aims to enhance AI training and inference capabilities at the Edge, thereby strengthening the AI ecosystem. Verizon emphasizes that by leveraging existing assets and expertise, they can scale AI solutions and improve their business's financial profile. The focus also includes mitigating wireline revenue pressures while growing in mobility, FWA expansion, and cost efficiencies. Hans Vestberg expresses excitement about these opportunities, highlighting the successful year 2024 and anticipating future growth. Following this, Brady Connor opens the floor for questions, starting with John Hodulik of UBS.

In the paragraph, Hans Vestberg discusses the momentum observed in both broadband and wireless services at the end of the year, emphasizing structural changes, product deployment, and rebranding efforts that have contributed to this success. He notes that their products are resonating well, resulting in the best customer additions in a decade for the fourth quarter. Fixed wireless access and fiber contributed to over 400,000 additions, while wireless services have shown consecutive improvements and reduced churn. Overall, Vestberg attributes these successes to effective execution, product alignment, branding, and network improvements, such as deploying C-band and enhancing fixed wireless access.

In the paragraph, Sowmyanarayan Sampath discusses the company's strong business momentum, expecting higher net additions in 2025 compared to 2024, and highlights the successful value proposition of myPlan, strong sales execution, and strategic focus on Tier 1 and Latino markets. Kyle Malady then comments on the significant AI opportunity, estimating a total addressable market of over $40 billion, with the company already having over $1 billion in its current service funnel.

In this paragraph, the discussion revolves around the customer upgrade environment and financial projections for 2025. After a period of decline, there is now slight growth in customer upgrades, mainly because consumers are keeping their phones for longer periods, exceeding 40 months. The upgrades are largely driven by new technologies and hardware designs, which have been lacking recently. The conversation also touches on the drivers behind EBITDA growth and free cash flow guidance, with an emphasis on factors like tax and working capital. Hans Vestberg acknowledges the necessity of more resilient products, while Sampath is expected to provide further commentary on these topics.

The paragraph discusses the company's strategy for EBITDA expansion and its commitment to growth. The approach includes cost-cutting measures such as voluntary separation programs and outsourcing. The company measures success through wireless service revenue growth, EBITDA, and cash flow expansion, and has seen positive results in these areas. For 2025, the company anticipates a mid-single-digit increase in device upgrades due to the longer device lifespan and many customers finishing three-year contracts. In 2024, the company achieved $1 billion in EBITDA growth and a subscriber increase of 2.5 million, exceeding expectations. For 2025, they project 2% to 3.5% growth, equating to about $1.3 billion at the midpoint.

The paragraph discusses the company's financial performance and strategic initiatives. It highlights strong service revenue growth, customer economics, and cost transformation efforts, including AI and managed services. The company is phasing out legacy network elements and has implemented a voluntary separation program. Despite challenges, it expects EBITDA growth and strong cash flow, projecting $17.5 billion to $18.5 billion in free cash flow for 2024, driven by EBITDA growth and a focus on efficiency. The cash flow for 2024 includes $2 billion from a tower deal, demonstrating resilience against pressures like cash taxes.

The paragraph discusses a company's financial and operational outlook for 2025, including a capital expenditure range of $17.5 billion to $18.5 billion. It highlights improvements in interest expenses due to a $7 billion debt reduction in 2024, and efforts to enhance working capital efficiency beyond just handsets. It notes that cash taxes will continue to be pressured by bonus depreciation, with potential impacts from future legislation. The company anticipates a mid-single-digit year-over-year increase in upgrades and excludes Frontier from its guidance. The overall guidance emphasizes strong cash generation supporting capital allocation priorities like investing in the business, maintaining dividends, and reducing the balance sheet leverage. This was followed by a question from Sebastiano Petti from JPMorgan regarding the $2.9 billion device protection and insurance revenue in 2024 and its growth rate, seeking clarity on how this will be reclassified and its contribution to service revenue.

In the paragraph, Hans Vestberg discusses the growth and strategy of fixed wireless access (FWA) amid C-band deployment, particularly in suburban and rural markets. Despite concerns about possible growth slowdown due to market saturation, the fourth-quarter performance was strong. They plan to introduce a multi-dwelling unit (MDU) solution in 2025 to boost growth in Tier 1 markets, augmenting their broadband offerings alongside Fios. Though focus primarily remains on mobility, their current markets are experiencing success, with anticipation of continued market share gains in broadband through FWA and Fios. There's also a consideration of the broader consumer phone market and immigration trends.

The paragraph discusses the positive outlook for fixed wireless access (FWA) and broadband services, highlighting new products and continued improvements. It mentions that their offerings are well-received by customers, with segmentation into premium FWA services and reliable fiber optics. This strategy has resulted in the company capturing over 50% of industry net additions and projecting continued growth into 2024 and 2025, aiming for 350,000 to 400,000 broadband net additions per quarter. Additionally, the company is focused on rolling out C-band in Tier 2 and Tier 3 markets and scaling an MDU product for FWA.

The paragraph discusses the expansion of Fios to 650,000 households and the company's confidence in achieving 350,000 to 400,000 broadband net additions each quarter, citing increased ARPU as customers opt for more premium plans. It highlights the company's commitment to offering high-performance, reliable broadband with transparent pricing, addressing common customer pain points like opaque pricing and poor reliability. Additionally, Tony Skiadas discusses the impact of recurring handset protection revenue on service revenue, noting an expected impact of $2.9 billion in 2024 and service revenue estimated at $82 billion by the end of 2024. The impact on growth rates from this revenue is minimal. The paragraph ends with Jim Schneider from Goldman Sachs preparing to ask a question.

The paragraph discusses two main topics: wireless service revenue growth and AI-related sales. Tony mentions a projected $2 billion increase in wireless service revenue for the year, with the growth rate expected to nearly double due to an accounting change, although specific guidance for 2026 is not yet available. Hans Vestberg explains that the impact of previous years' investments is diminishing, and they expect financial improvement. On the AI side, Kyle acknowledges a question about a $1 billion sales pipeline and indicates upcoming positive effects on revenue recognition, with a mention of a split between connectivity business and data centers. Kyle is set to provide further insights on AI.

The paragraph discusses a company's strategy to expand its service offerings beyond connectivity for web scalers, such as lit services, wave, and dark fiber, by adding power space and cooling to their portfolio. They plan to sell bundled solutions on a project basis while maintaining their margins. Revenue from this strategy was already booked in the fourth quarter, positively impacting EBITDA. The company aims to drive more business in this area through 2025. Following this, there's a dialogue shift with Ben Swinburne from Morgan Stanley asking about ARPA growth and the competitive landscape, seeking insights into the company's confidence in continuing to increase prices and the drivers behind consumer business growth. He also inquires about AI opportunities and the use of existing assets in the context of competitor investments in added capacity.

In the paragraph, Hans Vestberg discusses the company's competitive strategy, emphasizing their improvements in network, products, solutions, services, and branding. He highlights the ongoing enhancements in their network performance, such as expanding C-band coverage, and mentions successful product initiatives like myHome and myPlan. The brand refresh is noted as contributing to their competitive edge. Sowmyanarayan Sampath adds that their competitive advantage stems from a strong value proposition and brand, backed by a leading network. He also discusses their goal to balance service revenue from price and volume, aiming for a sustainable business model in the subscription category.

In 2024, the company experienced positive growth across its mobility, FW, and value sectors, reversing previous negative trends. The growth strategy focuses on two main components: volume and pricing. They successfully implemented several price increases, resulting in over $1 billion in service revenue growth for 2025. Customers are opting for more premium plans due to added value, such as enhanced C-band and unique saving perks. Additionally, the company is exploring new revenue streams like network slicing and enhanced satellite connectivity through partnerships with Apple and Skylo, which are expected to further monetize their network and provide additional financial upside.

The paragraph discusses the company's strategy for growth and market competition. It highlights their confidence in achieving good ARPA (Average Revenue Per Account) growth by 2025, leveraging existing assets and investments made over time. They plan to tweak and reimagine these assets as the MPLS market continues to decline. The strategy includes light capital expenditure to extend fiber reach to key data centers and business locations. They intend to capitalize on prior investments in One Fiber, Fios, and IEN to capture market opportunities. The paragraph concludes with a transition to another question, where David Barden from Bank of America asks about the composition of the "other" category now that fees and insurance have been removed from it, questioning if it now reflects the monetization of their cable relationship.

The paragraph features a discussion about potential industry mergers, specifically the possibility of Comcast and Charter merging, and its implications for Verizon. Hans Vestberg, with Tony Skiadas, addresses questions about how such a merger could affect Verizon's operations, particularly in terms of bargaining power and contractual relationships like MVNOs. Vestberg emphasizes Verizon's strong network position and its focus on maintaining profitable connections. Tony Skiadas briefly mentions managing financial guidance and cash taxes without providing specific details. Overall, the executives refrain from speculating on potential industry changes but express confidence in their network strategy and current partnerships.

In this discussion, Hans Vestberg and Tony Skiadas talk about their company's positive financial performance and confidence in achieving future targets, including plans for continued investment in the business. They mention increasing their dividend for 18 years, reducing debt, and approaching leverage levels that might allow for share repurchases. During a Q&A, an unidentified analyst asks about expanding the Fios network in their legacy areas. Hans Vestberg responds by noting the long-standing success of Fios and their plans to increase their open-for-sales by 50% to 650,000 this year, highlighting the ease of scaling the product.

The paragraph discusses the optimism around broadband expansion, particularly through Fios, due to improved economic conditions and the necessity of broadband. The company plans to participate in subsidies for building out infrastructure in rural areas if it makes sense for return on investment. The discussion then shifts to wireless service revenue, where Tony Skiadas addresses expected growth and pricing strategies for 2025. There’s mention of AI-related sales impacting the business's EBITDA, indicating confidence in a positive inflection point for the business's financial performance.

The paragraph discusses improvements in Verizon's consumer and business segments. It highlights strong volume growth in B2B, stable business volumes, and the expanding fixed wireless access (FWA) revenue base of $2 billion. Prepaid services are expected to improve revenue in late 2025 as challenges turn into opportunities. Although promotional amortization will peak in 2025, customer economics remain healthy with anticipated easing of headwinds by 2026. Sampath's focus on balancing performance and quality (P&Q) is positioning Verizon for sustainable revenue growth. Hans Vestberg praises the Verizon Business Group for its wireless growth, with significant net additions and unexpected success in fixed wireless access, along with effective cost management and achieving positive year-over-year improvements in the fourth quarter.

Kyle Malady expressed cautious optimism about their future work and highlighted that while AI Connect's revenue contribution was small, it played a role in boosting EBITDA, alongside cost efficiencies and new revenue opportunities. The company has achieved three consecutive quarters of sequential EBITDA growth, with year-over-year growth in the fourth quarter for the first time in a long time. Malady expects these positive trends to continue into 2025. He emphasized the success of fixed wireless access (FWA), particularly among business customers like banks and retailers, and identified a new market opportunity termed "copper-catch," which involves using FWA to replace outdated low-bandwidth copper lines. The company is also progressing with private wireless and AI Connect initiatives, showing a strong trajectory into 2025.

In a discussion involving Kannan Venkateshwar of Barclays, Sampath addressed questions regarding market growth and strategy. He acknowledged that while their postpaid lines have grown, account growth remains negative. However, he expressed optimism about targeting new segments like Tier 1 markets and the Latino segment to potentially improve account growth within the year. Regarding immigration, despite recent declines, Sampath emphasized strong performance in their value business due to refreshed value brands, collaborations with Walmart, and expanded wireless distribution. They anticipate the postpaid market to grow significantly by 2025, leveraging wholesale channels to capture pre to post migrations.

The paragraph discusses the company's focus on growing customer accounts while emphasizing the importance of building deep relationships with customers for long-term growth. The company prioritizes offering superior connectivity products and expanding customer relationships by selling additional products such as entertainment perks, protection, and cloud services. It highlights strong growth in Average Revenue Per Account (ARPA) and stresses the importance of having profitable customers who value the quality of the network and the company's offerings. The conversation concludes with a thank you to Kannan and the end of the conference call.

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