Q1 2020 Earnings Call

Good morning, and welcome to the for Rice in first quarter 2020 earnings Conference call.

At this time, all participants had been placed and they listen only mode and the floor will be open for questions. Following the presentation.

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It is now my pleasure to turn the call or what's your host Mr. Brady Connor Senior Vice President Investor Relations.

Thanks, Brad Good morning, welcome to our first quarter 2020 earnings Conference call. This is Brady Cotter and I'm here with our chairman and Chief Executive Officer, That's Berg and that Ellis, our Chief Financial Officer.

Under our earnings release financial and operating information and the presentation slides are available at our Investor Relations website, a replay in transcript of this call will also be made available on our website.

Before we get started I'd like to draw your attention to our safe Harbor statement.

Information in this presentation contains statements about expected future events and financial results, Therefore, lucky and subject to risks and uncertainty discussions of factors that may affect future results is contained in Brighton filings with the FCC, which are available at our website.

This presentation contains certain non-GAAP financial measures reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website the quarterly growth rates disclosing our presentation fly and during our formal remarks brought a year over year basis.

Otherwise noted a sequential.

Now, let's take a look at consolidated earnings for the first quarter in the first quarter. We reported earnings of one dollar per share on a GAAP basis.

Reported first quarter earnings included pretax loss and special items of approximately $1.4 billion, including go off on spectrum licenses related to auction one of the three a $1.2 billion and a net charge of $182 million related to a mark to mark adjustment for pension liability.

Excluding the effects of these special items adjusted earnings per share was $1.26 cents in the first quarter up 5% compared to $1.20 a year ago.

Let's now move to slide four and take a closer look at our first quarter earnings profile.

We expect 2020 to be the final year that the adoption of accounting standard <unk> fixed dose picks for revenue recognition well have a material year over year impact on our income statement.

As we illustrated in previous quarters, we realized a lesser benefit the adoption of assets. These fixed dose six during the first quarter compared to the prior year, primarily due to the deferral of commission expense.

The reduction of the benefit realized creates a year over year headwind to both reported and adjusted earnings per share, which will continue throughout 2020, the impact was three cents for the quarter.

Year 2020, we expect headwinds from the deferral of commission expense to be approximately nights that.

We estimate there was a negative for setting that impact included in the reported an adjusted EPS from Kobe during the quarter, Matt will go through this in more detail later.

Adjusted EPS growth of 5% over the prior year illustrate on the earnings waterfall slide reflects the strong underlying performance of the business, partially offset by the impact the deferral of commission expense.

With that I'll now turn the call over the hard to walk you through a recap of the actions we have taken during this unprecedented Todd.

Thank you.

Denise earnings call.

Maybe a different from.

Previous long said I have no I've been in crises sand the telephone tried to be you know 2000, <unk> Bank like you said 2008 that might be something totally different it's a healthcare crisis with that and then make that say impact each and every one of the loss wherever you are indeed what.

I'm, probably little bit team over isom, how we have been sucking up these crisis and how we work together, we decided very early on let's be thought team in <unk> crisis management team and their leadership team continued to drive RBC at school what in the Middle of February We made that's me in order to see that wax net spending all the things.

That's happening in their company decisively rights.

<unk> 19 response has been based on how we manage dollar for stakeholders, we have taken decisive action, but they're all bad luck.

Thinking about the long term and the positive impact for all stakeholders, let me quickly gold and what we have dominated be friend and I'd also say call. It one Dan you side not door to door on NBS are working from home. We moved quickly to work from home environment today, we haven't high productivity in that.

We have also retrain, some 20000 old Im pleased to work with new tasks and work from home and South Eastern a thousand old third parties that is bought dog deliberate.

So neither the.

Well, our MTBC line, serving customers keeping up the networks at the same time, that's keeping some of our stores open web Ross if don't give a sense of our stores open of course with limited opening times and also only by employing but they are playing your bite the role to keep up the most important infrastructure in DC.

Andre right now besides holes, but then some first responders.

I'm happy to report the team is doing a great job and talking about that customers. We have been attending all customers with new demos to wouldn't be surprised here at the same time. We are also part of the pledge, you'll keep Americas connected which means that we are waiving late fees or older age is for small and medium.

Yes. This is on the residential customers that's been impacted by the court on my wireless.

Okay, that's what I would come back to that or at least a bit later.

Our work in the exercise has been community is not so what is extremely important right now a large corporation need to take the responsibility wed ensemble it like that pay its forward, which you start going Thats why sometimes three times a week, we choose gathering and concert short celebrity bringing Pete.

I actually being too and helping small and medium businesses, we coated paperboard.

But also worked with W.H.O. another organization that need pad and ultimately supporting the most vulnerable in our society finally ill and education side that we always had been focused on where not only supporting to schools that had already have their support for but there was I think you got to enjoy times offering all nycomed from new it.

Times to want to high school students across the country. So I, probably who are doing in that area and finally on the financials. We have also worked quite the not with what we're doing in the cost side were taken already cost measurements into first quarter and the team from third for disbanding see your force. That's my traveling that's what we're doing these prudent let's see.

We said on top of that we increased the capex guidance in the quarter, because we felt that it wasn't good time for us to continue to see that had robust network that we went into it and moment in time with we don't really know with all the network would be used at same time of course or send the message that we think it's a good return on any of that.

On that incremental Capex anything fine I think im not any team has done a great job all the see that the balance sheet. These in the best shape.

And then liquidity in the me in the quarter, two very cost, it's David gold and the cost. So that we had we're also working within or if not it nobody really knows how these going out, but we had seven scenarios and actions that we're working with us leadership team.

Let me talk about the network believed to be it then we have been reporting every week.

Development, although our network seems that outbreak all depend them they've gotten debt.

I've seen some staggering numbers night over 200 and stand up on gave me 10 times up on calibration tunes talking percentile, Colombia deal.

I didn't mean young cool once a day, which it twice the amount so what do I have a mother's day wish the biggest day a year.

That we have been managing very well wait a network. We have built the robot met so again, we're getting <unk> high quality <unk>.

And then a week to week you can see on this slide that we had much less don't change here, we feel that we have settled in on that type of usage over the next door and where it's you. So it's very small variation.

Just want to point out the moment handled switches basically how.

Our customers are moving between different settles down 35% seems that outbreak all the cold in 19, I think in certain places like North Sea. These older 50% reductions or more when handles all of our network hold up then when it comes to all those changes.

So how we chose <unk> during the Mets today, Dan how are you kept passive reimburses up be salaries in the widest that.

I guess, he we continued to keep the same headroom in the network and when we come into called me at 99. The main reason east. That's first of all we weren't prepared with added capacity, but also the next we'll get you indeed been timeframe with different applications.

Split with the any you sold the ADW three temporary spectrum that they have to see so greatly landed to all seem to be email describe because that's the nature, whereas he did you see it would go somewhere we wouldn't know, but however, I can never report that dollar technicians and our operations team had done a fantastic job and the network.

Very well, we did changes and enormous usage on the network.

Hey, let's finish out before I hand over to Matt Im talking about the progress towards our 20 to 20 called me. They are in fact, we work to see that we can bolt ons and these crisis, which is unprecedented but the ones that continue to execute on us dropped pretty when it comes to strengthen our core business and grow our core business of course, we're not.

I'll have more do you couldn't say somewhere out before we chase so of course very encouraging but also strengthened our core business, but they are very good and nice piece old millimeter wave spectrum that keeps so it's very good holdings for Lifestride.

When it comes to leverage our assets and growing into future. Our five give plans and our fiber plans that built adult all are on plan. We were older. So at least to be to handle plan. When we ended the first quarter and I can report seen today. We are old plan, we to 5 million fiber of course o'shaughnessy, it's out there when it comes to cope with 90.

And so on but our team out finding new ways of innovative ways to actually do the deployment. There are ways sold dealing with the approvals from then mini supported by new ways that we had great collaborations from many all day and municipalities to do with everybody be problems going forward.

Well, it's a cold and that my team or better even though they Steve in the seem to see that we continue to drive hard on these wells did an acquisition are you. Most recently the blue jeans acquisition, adding to it and what not and I said in the fourth quarter talking about the investments we want to do you eat rice and beans. This group, where we see a great deal, but you will need to handle.

It's been accentuated in these Corbett 19, where we know that do genes to capabilities both to our existing distribution.

For the future five.

Where we think there or do you do capability, that's going to be extremely important wonder if when I said dissipate we continue to drive that not if need be done work, both be planning and what were doing.

And finally about our purpose we've been company. We just so important need time to see that you have all your employees with you were doing a lot oh impact into society.

Our children born until rates right now and were not aware and police can actually contribute to the society in these tough times and finally, we also actually communicate with our employees basic that everyday on than like when can you know what do you see that everyone knows what we're doing in where were going in times of uncertain.

Quickly on that first quarter last when covered much better I'm, probably a team delivering a strong growth in the wireless service revenue.

Also a 5% growth on our adjusted earnings which includes the impact the Golden 19, and it down a strong cashel up 26% year over year.

Segments, all had their challenges, but also with the screen thing this quarter, mainly the Chinese as Kim from Cold at 95 below the guidance, we decided to continue to do second guidance. Even there are certain unclarity it seemed to market than older future. We decided that revenue we would not guide on the revenue.

Because the hardware, it's so hard to predict that these goals, but we are guiding on oneq the S and competing there with all the right. That's that's why that math would go to that didn't beat they always with a understanding that we don't have all that did not least once we're going to happen when you make need to make assumptions about by that I handed over to Matt. Thanks.

<unk> and good morning, everyone as Hans discussed we are in an unprecedented times as a result, as the impact with the Kobe 19 crisis at the various measures taken to address the emergency we experienced starkly different trends during the first two and a half months of the first quarter than we did during the last few weeks.

We understand that most of you are more interested in what we are currently saying at the business. So it goes through the coffee results at a high level and spend more time addressing the most recent trends and how they impact our expectations for the second quarter and the full year.

We will begin with the review about consolidated operating and financial results.

And the first quarter consolidated operating revenue was $31.6 billion down 1.6%.

He said wireless service revenue in both the consumer business segments was offset by sharp reductions and equipment revenue consolidated wireless equipment revenue was down 16% in the first quarter driven by the consumer segment, primarily as a result at the limited installed customer engagement in March because it.

Adjusted EBITDA was $11.9 billion down slightly from last year included the impact from coated no why this volumes in consumer group truth benefits to margins through decreased promotional spend the older equipment revenue and improve Chad these benefits Wimbledon offset by higher bad debt expense.

Advertising revenues from drives the media group in March and customer actions have resulted in a decrease in wireless phase and nonrecurring usage charges.

Our incremental bad debt reserve of $228 million was the largest components of these items.

Headwinds from the deferral of commission expense of Brady highlighted earlier reduced EBITDA by $172 million, which has an impact of approximately 55 basis points to EBITDA margin in the quarter.

We have continued to focus on that business excellence program with the go to realize $10 billion, a cumulative cash savings by the end to Twentytwenty, one I'd have to save $6.3 billion through the end to the first quarter. The activities of this program over the past two years I've put us in a position to be more John and adaptive and I'm second time.

Like they.

Adjusted EPS for the first quarter was $1.26 up 5.0% from $1.20 a year ago. This included an estimated net impact from cooperative approximately four cents, primarily driven by an increase about bad debt reserve.

Let's now turn tough second results, starting with consumer group on slide 10.

How consumer team continues to deliver best in class services to customers, while keeping them connected that personal and walk communities. We are extremely proud of the team's performance, particularly our frontline <unk> 'cause efforts to meet how customers needs. During this very difficult period.

How consumer segment started the year with typical low seasonal volumes during the first quarter.

In March customer transaction activity slowed significantly due to shelter in place policies travel restrictions and other measures taken to promote social distancing. They turn Nicole I would go into a deeper discussion on the exit rate trends as we said about customers in this new environment.

First quarter phone gross adds with down nearly 13% year over year I postpaid phone net losses were just over 300000 for the quarter.

<unk> performance was solid throughout the quarter at 0.77 cents.

Which was down four basis points from a year ago.

Consistent with first quarter seasonal volume activity and the impact of cosy.

How retail postpaid upgrade right remain closed during the quarter and it's one of the key contributing factors to the decline in wireless equipment revenue. We expect these trend to continue for as long as social distancing policies and other safety measures to protect our employees and customers continue to live in store traffic.

Five internet net additions at 59000 up sequentially and year over year as work from home in home schooling and other related measures increase the utility and demand for our high quality broadband offerings.

Hi, its video net losses accelerated for the quarter and we expect code cutting trends to continue.

And it didn't show the safety about customers and employees, while providing critical network services, we've modified our approach over the past few weeks and I don't currently entering customer locations, except for critical functions.

Now, let's move to slide 11 to discuss the consumer financial performance.

Seamus segment into Twentytwenty was strong momentum as we added a significant number of wireless connections towards the end to 2019, which favorably impacted the first quarter for fives consumer products, we launched new mix and match pricing early in the quarter, providing price transparency and choice you know broadband and video offerings. We also entered.

Juice Yahoo, Bhopal to expand out wireless offerings across our digital media customer base.

We continue to generate strong service revenue and other revenue growth.

But this was more than offset by a significant decrease in wireless equipment revenue due to low volume activity.

She must segment total revenue was down 1.7% year over year.

The growth in unlimited plans, increasing connections per account and high demand for our broadband services in the quarter drove strong profitability for the segment offset by an increase in bad debt expense as a result at Cobiz impacts consumer EBITDA margin of 46.4% was up 60 basis points over the prior year and included approximately.

He bases points that headwind from the deferred up commission expense.

Our equipment revenue at a limited impact on our overall EBITDA performance.

Now, let's move to slide 12 to review the business group results.

During a time and connectivity is providing critical support to those impacted by this crisis. Our business team is at the forefront to set our enterprise small to medium business public sector and wholesale customers. We remain an outstanding partner Professor sponsors health care providers and other frontline workers as Hans mentioned, we're extreme.

To be proud about teams walk to deliver essential services to our customers. So they can say about those.

Business trends with strong throughout the quarter and we saw a heightened demand for our products and services a much.

Businesses need have services now more than ever as we saw strong demand for mobility jet packed VPN services and high speed second capacity in the started school.

As you look at the detail on the slide for wireless products you can see phone gross adds were up 25%. The prior year driven by strength in global enterprise and public sector with offsetting pressure and small and medium business.

This contributed to postpaid phone net adds a 239000 and total postpaid net adds of 475000 business segments phone churn of 1.02% to the quarter was flat year over year, driven by strength in public sector without facing pressure and small to medium business.

Let's now move to slide 13 to review the business financial performance.

Operating revenues for the business segments in the first quarter went down approximately 7.5% from the prior year wireless revenues within enterprise SMB I public sector, well up year over year, driven by strong wireless service revenue growth of 6.9%.

This was offset by legacy why line at wholesale revenue declines.

We are encouraged by the business EBITDA performance in the first quarter, which was driven by tight controls around spending and strong wireless performances, we generated solid profitability, even with higher than usual volumes and the ongoing transformation investments in the second or for future growth.

Now, let's move onto slide 40 to discuss Horizon Media group.

During the first quarter Horizon Media group performance was impacted by Cove, it's similar to others in the digital advertising and such business Telecom revenues $1.7 billion down 4% compared to last year, driven almost entirely by killing it impacts.

Because of it a year over year revenue trends will continue into steady improvement seen in 2000 banking, we are seeing increased levels of customer engagement across our platforms, but advertising rates and such revenue has declined and the current environment.

Verizon media lodged a kuroda far as hop on Yahoo News at Yahoo, Finance, the covert 19 used three Yahoo fail, both of which are driving significant customer engagement as we aim to keep uses informed on what is happening at the area at around the globe, we trustee content.

Let's now move to slide 15 for a quick look at the over wallets before.

Slide 15 chose to key metrics and financial data of the combined wireless products and services from the consumer and business segment for the first quarter.

Total wireless service revenue grew 1.9% over the prior yet.

Additional details are provided in the financial not pricing information and our supplemental earnings releases schedule was what I website <unk>.

Now, let's review, our cash flow and balance sheet for the quarter on slide six stake.

Cash flow from operating activities was $8.8 billion, an increase of $1.7 billion from the prior yet this year over year growth was partially driven by voluntary separation program payments and voluntary pension contributions in the first quarter 2019, but did not repeat this year as well as working capital improvements.

Operations this quarter capital spending for the first quarter totaled $5.3 billion, which is up approximately $1 billion year over year, we expect the timing of capital spending to be both frontend loaded than it was last year.

Capital expenditures continue to support capacity for unprecedented traffic growth across our networks, while we continue to deploy more fiber and add additional cell sites to support that five to rollout.

As we mentioned down here in March we increased our full year Twentytwenty capex guidance to $17.5 billion to $18.5 billion in order to facilitate for reasons network activity and help support the economy. During this period of disruption.

Free cash flow through the courts, it was $3.6 billion, which was up 26.2% year over year and continues to find out dividends.

Balance sheet continues to be strong with very low unsecured bond maturities through the end of Twentytwenty, one how net unsecured debt to adjusted EBITDA ratio was 2.1 times up slightly from year end.

Let's move onto slide 17 to take a deeper look at the trends we've seen in the last hospice lodge and into early April.

During the month of marches Kofi safety measures were implemented with you federal and state recommendations to social test and see a retail consumer and small business activity diminish significantly.

By the Middle of March we saw a dramatic shifting customer behavior as stores closed and other business activity halted across the country.

At the same time, we experienced increased amount from a public sector and some large enterprise customers to support frontline crisis respond as you work from home and home schooling arrangements and I'll, let them onto a critical connectivity services.

This slide provides selected metrics for March 15th straight booked 50.

And office and more intense view, but the only impacts to the current cobot environment.

At this point, it's unclear how long these trends will continue.

And now consumer group, we closed nearly 70% about company operated retail stores and reduced install services throughout the day, the social distancing safety measures.

As you can see on this slide we experienced a significant troughing customer activity and device volumes during this period.

Consumer why this gross adds declined nearly 50% from the same period, the prior year and upgrades declined over 40% as expected, though a customer switching across the entire industry has led to a significant improvement in furniture.

As part of the industry's effort to help customers. We saw the Fccs keep Americans connected pledge in March I will waive any late fees and keep customers connected in the event at non payment due to their pandemic for the period at the pledge.

We have added 50 gigabit says data to me to consumers and small business plans and also to hotspot usage from limited plant. This additional data along with increased in home Wi Fi usage has resulted in lower data overdraft during the course.

In addition to these customer focused actions and impacts consumer behavior has changed dramatically over the short time period, such as reduced international roaming revenue.

I wanted to keep our employees and customers save through social distancing, we're generally nonperforming installations for consumer fives would work inside the home would be required.

Gross adds a current limited to those that can't be performed directly by the customer or with a technician working outside the home.

In our business group, we've broken out the transfer of small to medium business customer group showed the drop off that we have stayed in gross adds and upgrades as a major portion of small businesses I've seen a steep reduction in activities and in many cases afford shutdown.

In contrast to consumer not saying the same improvement in churn at this time.

The public sector and some global enterprise customers, we've seen an increased amount so remote connectivity solutions as a greater number of people are working in schooling from home modest gross adds to these customers were up 163% over the similar periods in the prior year, mostly driven by demand for phones jet packs and other connected devices.

Our network superiority and longstanding relationship with enterprises first responders and other workers in the front lines has given us the ability to support that connectivity needs across the country when they need for rising most.

In addition to the increasing gross adds activity, we have seen an improvement in retention for enterprise and public sector customers with phone churn improved by 35 basis points. During this period.

We are working with all of that customers. During this time to ensure they stay connected even if they're experiencing financial hardship as a result coated we believed that our enterprise public sector and wholesale customers will be relatively less impacted than our SMB customers. Initially, but we may see increased long term rates from the crisis.

Wireless service revenues in our business group being impacted by reductions in overseas a reduction in international roaming and an increase in suspension of lines.

Across consumer and business, we believe total wireless service revenue growth could be three to five percentage points lower than originally expected in the second quarter actually results as a reduction in sees and usage based revenues.

Additionally, bad debt expense increased as a result to that changing expectations around customer payments. During this time.

In the first quarter, we increased our bad debt was up by $228 million based on the expected number of customers, who will avail themselves of payment relief under the keep Americans connected pledge, we will continue to monitor consumer and business payment behavior.

We'll work with our customers to help them stay connected despite difficult circumstances as a result, it is possible that additional bad debt reserves, maybe required in the second quarter.

In terms of media, we're experiencing a declining advertising and search revenue as appetizers tolls hold back or cancel campaigns. During this time and uses a searching for a few of commercial terms, providing us with less opportunity for monetization as a result advertising revenues declined by nearly 10% in the month of March.

Weve clearly boasts the impact in the second half of them up and that rates. It decline has increased in April a number of industry forecast expected, 20% to 30% decline in digital media revenues in Twoq and for eyes immediate results are likely to be similar to those experience and the broader industry.

Now, let's go to slide 18 to discuss that guidance outlook for Twentytwenty.

Obviously the environment, we find ourselves in today is fastly different than when we originally gave guidance just a few months ago.

Given the unprecedented magnitude at the conditions, we have all experience, we're updating our financial guidance for the full year, we remain confident that our strategy our business model and our ability to generate sustainable long term earnings for our consolidated revenue guidance of low to mid single digit percent growth that we announced in June.

Oh, sorry included the expectation the Twentytwenty equipment revenues with no create similar year over year headwinds as it has in the past few years.

However device activations of being low since mid March and we expect that to continue throughout the second quarter with uncertainty around customer behavior for the remainder of the yet.

The wide range of potential outcomes around equipment revenue that has to determine it is prudent to withdraw out consolidated revenue guidance at this time.

For adjusted he P.F., we are revising our original guidance of 2% to 4% growth on an outgoing to a range of negative two to positive 2% changed the prior year.

How do you estimated range is based on a scenario and it seems significant headwinds profile throughout the second quarter, we have limited visibility into the second half the year, which will depend on various potential operating environments. We will continue to assess the impact of coke. They don't have business, including out bad debt reserve and expect to provide an.

Update on our next earnings call based on how things develop between now and then.

Other income statement items for which we provided guidance included depreciation and amortization interest expense and the adjusted effective tax rate remained intact as originally guided.

As we mentioned earlier, we have maintained out capex guidance for the full year, we announced in March.

Our supply chain remains strong and we have not seen a material slowdown and the sourcing of necessary equipment from out of network and device partners.

We are optimistic that the measures government agencies has taken will provide support the citizens businesses and the frontline respond to say being impacted by this crisis. We remain keenly focused on doing our part to provide best in class network performance and customer experience to all about customers, which will continue to drive long term.

Operational and financial success, while weathering short time disruptions.

Despite the extreme nature of what the world is experiencing we believe that Verizon is well suited to remain resilient through this situation.

Let's take a look at slide 19, the discuss have strong balance sheets and liquidity position.

Over the past few years, we have strengthened our balance sheet and there was also those actions that put us in a good position to manage through the impacts of the country pandemic.

We ended the first quarter with $7 billion of cash on hand, carrying a higher cash balance during a market crisis as part of our liquidity planning strategy and we executed on that strategy with a three and a half billion dollar bond offering completed in March. In addition, we started and ended the first quarter with no commercial paper outstanding but.

Have access this market in the second quarter to further enhance our liquidity.

During this last quarter and before the market disruption. We also completed one about law justifies payments securitizations for $1.6 billion.

Having a cash cushion is prudent right now for many reasons, including our expectation certain customers may have difficulty, making time you payments as a result to the crisis. We're closely monitoring these trends with regard to their impact on RMBS programs.

In the second quarter, we have some nonrecurring cash outflows, including $2.7 billion of maturities and $1.3 billion spectrum licenses from auction, one or three scheduled unsecured bond maturities through the rest of Twentytwenty on zero as a result about continued liability management strategies that keep near term maturities low.

Additionally, at the enters 2019, given how funded status and pride discretionary contributions we expect no mandatory contributions for our pension plan to twentytwenty six subject to market conditions.

Our pension funded status as being further protected in recent years as we've increased the hedge ratio about liability to about 50%. This resulted in the funded status about pension plans I'm de declining from 92% at year end, 87% to the into suppose quarter out standby credit facility without bank group has been.

$25 billion provides further shorts for our liquidity.

Our balance sheet is strong and our liquidity position has been further strengthened as we navigate this difficult period for our customers and the markets. We have demonstrated the ability to access the bond to commercial paper pockets in recent weeks.

Our strong financial position gives us confidence to continue to invest while also supporting all of our stakeholders.

Turning it back over to hogs to provide a look at out Twentytwenty priorities and then we'll get to your questions.

Thank you, Matt Let me just rounding software the our priorities going into this year ended in the future first of all I feel that went very well positioned say kikuyu both in the near term in the long term, it's a great more value for all our stakeholders. We have never rise in two to told transformation a week piece, a new leadership and you'll netbook thickness.

It is new go to market.

Delivering on that and I feel that we had good results or read there right now but more to calm.

Equally so how did very good strides in rounded Corbett 19 response that is covering one large stakeholders in a balanced way in order to create long term value for all of them.

The five you still very much seem to need then deceptive our strategy and that's you heard me, saying before we on the need beloved execution and were not the whole thing that were keeping it up all the time and the team is doing a great work there and we see opportunism in five need going forward, both would that be legal does he see that five your mobile page compute as well.

Yes, and making these nationwide five even this year.

I've talked about R&D simply and then in finances in our capital position and our capital allocation I feel good about that we have done a tremendous not lost when minds, but also the last three months in order to put those into good situation to continue to meet all did it won't see no capital allocation old away from RBC please towards share.

The whole nurse toward debt holders and ultimately I think the this strong brand that we had in reinforced in times like that both by the talent, but the most of all the response would be says practices on the way we're dealing with our society. So all in one I feel good about their capacity I seen that's willing to meet and little bit execution on it we.

You need done in multi pronged strategy, where we're managing the crisis at the same time, but that nothing I mean, we should note. They should do well know strategy. So by that I handed back to you rating.

Thanks on Brad we're ready to take question.

Thank you we will now begin the question answer session. If you would like to ask a question. Please press star one please UN mute your phone and record your name clearly when prompted your name is required to introduce your question.

Withdraw your request please press star too.

One moment for our first question.

Our first question comes from Brett Feldman of Goldman Sachs. You May go ahead.

Thanks, Thanks for taking the question I'm a question about your updated EPS guidance you know as you noted during your presentation certain activity in the business has declined significantly I would assume that there's a degree of cost savings associated with that you also highlighted some areas where you're seeing some pressures.

Okay roaming revenues as an example, so I was hoping you can maybe just give us a little more insight into the puts and takes that caused you to see a slightly lower outlook for earnings over the course in here and then just went a clarification you said that this revised outlook reflects headwind you expect to see in the second quarter I'm curious, whether you're saying that the variance in earning that you expect to report this year.

Will primarily be contained to the second quarter, where if you're seeing that those headwinds for the remainder of the year collectively result in a change thanks.

Hey, Brett Thanks for the question and good morning, everyone. So as you look at the guidance and we went through some of it in prepared remarks, but as you look at the items that are in that when I think about the revenue side for the second quarter really break it up into two major buckets you think about.

The actions that we've taken and the the actions or the impacts or changes in the customer behavior. So as I starts off and think about the actions. We've taken it starts with obviously the Keith Americans connected pledge for that 60 day period. The vast majority of that is in the second quarter and so we'll see more impacting.

Due to them they saw in Q. What additionally, as we mentioned we've given customers an extra sifting gigabytes of data and Oh, whether that be on me two plans or on the hot spots are those customers on limited plan. So that's gonna have a significant impact on the on the overage fees that we would normally collect earlier. This week we are now.

Yes, so we would be extending that 15 gager bids from the end of April through the end doesn't make.

On the customer behavior side, one of the obvious ones, there's obviously international roaming.

Hi, good sad to say you can put a pretty low number in your models for international roaming revenue for the second quarter, but also in there as we think around especially in the SMB sides of the business, we would expect to see those customers spending some of the lines on their accounts Oh. So this time period and that will have an.

Impact on revenue to so when we add all those things up.

We see that said those should impact year over the years or service revenue growth and under the 3% to 5% range in Q2. Some of those things will obviously extend beyond Q2. Some other things may not extend beyond Q2, obviously, we control or how much we extend the actions the customer behavior will have to see.

Being impacted by more than macro environment. So, let's see how that plays out into the into the second half of the yet. So you have that they're on the service revenue side as you think about a other parts of revenue obviously equipment revenue beat out but also within made here as I mentioned, we're seeing a significant reduction.

We were down 4% or the says cause of a 10% in March to basically all of the year over year decline in first quarter was contained in the code that area and then as we've gone into.

The second second quarter here was seeing a was saying that those are reductions increase. So you know a lot of the industry forecast is 20% to 30% reduction of 1.7 billion of quarterly revenue.

That's obviously a material number too so we have some benefits come through on the expense side that obviously those revenue impacts all good no impact the overall profitability in the quarter and you see that reflect it didn't have died.

In terms of the back half of the year really too soon to tell I mean, there's a there's a lot of things to play out here over the course or the next 90 days or why the much better sense of what the back half of the year looks like a and then obviously, we'll update our view on that when we get to the next cool, but we're optimistic now what we that's what we don't know will be.

You know as we come into this situation in a position of strength. We've had good performance in the business over a number of course is now a we come in with a products and services said, obviously very important to customers and we come in with a balance sheet that weve tons significantly over the past few years. It gives us a little bit of a shock.

Absorbed as if you will so that we can keep operating out business and position ourselves to come out on the other into this situation.

From a position of strength. So that's how we're kind of saying to the second quarter, and we look for which the rest of the year Brett.

Thank you.

Thanks, Brett Hey, Brad we're ready for the next question.

The next question comes from John I'd look of you'd be US you May go ahead.

Great maybe to follow ups or bretts question on the on that three to 500 basis points, Matt as you can you give us anymore color in terms of maybe the sub impact in the ARPU impacted <unk> that you expect to see from all the different pieces. I mean, you gave some great detail on what's going on in a in April here, but maybe as a sense for what that sort of total gross.

That impact that you expect to see.

And then maybe on the ARPU side, you know how big these components are that are being affected and how that.

Could potentially play out and that sort of 1% to 3% service revenue decline, you're expecting and then maybe new topic on on the Fireside. When did you guys start the new policy of not entering a consumers' homes and I saw I think he's it shows here that internet.

Net adds or are definitely slowly, but do you expect that to go negative and then what do you see for for video trends as we look out into second quarter. Thanks.

Yes, Thanks, John So following up on the service revenue when you think about the the off to a you've got the based billing and then you've got the additional things that go into whether that be international roaming whether it be overages, whether it be late <unk>. So we feel really good about the coal.

Billings within the business I was saying customers use our products and services, obviously on a on a.

In a very strong fashion.

And I should actually expect to see that continue to where we will see some pressure is around the edges, but those other parts of what we built whether as a site be roaming overages or what not so you know, but the vast majority of that 3% to 5%.

Comes from those items that Oh, we build it or in the service revenue line.

And then on top of that you'll have the impact of systems.

On the Oh, DSMB, besides let's see how much that plays and.

So overall most of the you know, we but we'll see an impact your ARPU that as we go through the courts have been shops and looking at a great position as we mentioned the that Sean a is that a low level are you looking at about a 0.5 type of range right now in consumer although see that's very low compared to where it has being.

And I think it reflects the fact as you go into a time like this and she was obviously value the quality of that network connection with the with increased activity we've seen across it. So all in all that's where you'll see the majority of the impacts in the in service revenue as we go into the second quarter here and I'll outside of Hollywood, the homes and the thoughts and comments around.

What would do is file send a the engineers going into consume in times of <unk>.

And thank him out.

I'll now, let's say one thing that we have embarrassing I want to armies of course is safe and the safety and hands for our employees I'm Ah. That's why we were a very early on to actually goes down almost 70% of our stores and go to new.

ER sort go of it'd be sitting hours and all of that is saying we have done we don't engineered seem to see is very important bras to see that they are saying some has down and a in the beginning here we were better restricts the adult and the obesity the homes, but we'll also seen a little for the innovation on the last couple of weeks here.

We have actually even though they give this a weekend stopped.

Installing PHYOS without going into the homes with both the well did quantify you'll see the books, a which is where the consumer it or to customers. He is the only them sadness aswell less where one so how the books at age and right now where to customer again can be guy you Didnt hold to do these delays that innovation, we had been able to do into three weeks.

Now, we start ramping that up and I'm confident that all the time, we won most can be back on a normal level. It's all the installation, but we didn't say even healthy although our or at least that's well for our customers.

He doesn't again I, just coming back to the organism balancing either crisis like these unique abandons all the different stakeholders and see that you're really out of the priorities right and our priority has been from the beginning this the safety enhance pro athletes. That's very important second these of course, the speed at our net risky or staying up decor sold that.

Well the poor outcomes all our infrastructure in these times, because we know that the concrete.

He need dealer or network and not technology, staying up and having the highest well it got a rise in almost all had so well not seen that every day here and I think when management very well and I said the innovation is now tailing off that we can we can go back to something that is normally but then it told the new weight well do we get some hum.

Great clinical Nike.

Great. Thanks, guys.

Yeah. Thanks, John if I were ready for the next question.

The next question comes from Phil Cusick of JP Morgan you May go ahead.

Hey, guys. Thanks to clarify one more time and its 3% to 5%.

In Twoq you can you. Please confirm that is versus your prior expectation for year over year growth rather than just year over year.

And also can you quantify what the service revenue headwind was in the first quarter versus the rest of regular business growth rate.

And then second Horizon media revenue sounds like down 20% to 30% in the second quarter. What are the margins look like in this business. We don't really know much about whats the sort of cost flexibility is there and whether margins can stay positive or or flipped to negative whatnot revenue comes down quickly. Thank you.

Yes, Thanks sale. So as you look at the as you look at the service revenue and you think about the impacts in the via the 3% to 5% is really is gonna be freight and thought that low than they otherwise would've been a reduction and the growth rates on a year over year basis.

She is what you'll see that there was a a a small impact on service revenue into first quarter. If you think a across both consumer and they end up 30 to 40 basis points. It service revenue growth.

So the 1.9%.

I would have had some some upside without the the impact that we saw the back end of March but a waiver in.

We like where the position to service revenue trajectory is as you come into the quarter as you go into Twoq you hear the core underlying performance at the.

While this business in both consumer and business is is very strong and we expect to see that show up enough service revenues throughout the rest of the yet.

[noise] something that's about the rice and media group I, Oh, that's not Nick or to the of course that wed seen them even back late they want more advertising.

Well of course encouraged about the increase that activity, they're grills the old engagement, because that's ultimately when it pales Nate wrong and I think the personal alarmed by some need a team has been extremely innovative new products and new ways of delivering a service dates the last the last couple of weeks.

Even in a time old obese I'm them, they add a I have hussein up on local currency mother awesome <unk> Jude to work, we deepened scenarios given how these condemn they will develop and always will eat rice will be general web seem to last 18 months or I don't know six quarters that they've raised and rising media group. So.

I don't waste the both to reduce cost and find new ways to innovate, but all in all we need honest on that the of course advertising you'd these days you already see if youre, a youre a cautious and gave them a the pandemic, but again I think that that as I said it beginning we're working with different scenarios that can happen.

And we had different neighbors and TV is that we can do give them where decent going that those were all different businesses, which was in defense form and shape at the moment.

But the doors that goes where the old Corporation.

Then just dealing with that said about the or why you does these days I think thats one thing that glimpse anybody seems we embarked on the on the make did.

Some two years ago, we have caused them to be a mold which can actually.

Need all the difference in orders all the way from our mix and match or even leasable Yahoo. Low by the work were doing we track phone the network as a service I think that we goal is where it will go we would hope that you would at least two to two actually serve our customers with the plans that they need and I think it few others can do that and even small.

That's what I left we have the best network. So I think we're well positioned a ink in the award that might be uncertain, but with all those different type of opportunities are so about customs.

And just real quick on the cost side that comes obviously the service revenue impact in the media revenue impact, but obviously, we're doing things to manage the cost side of the business as we go through this go through this period and it's ready a building on the what we've been doing for the last few years now and it's put us in a position where we can take the AG.

Options that we need to in this time, we'll see some cost benefits as we go through this but it also allows us to do the things to support our employees.

I'm customers and to keep investing into business for the long hole or even as we're in this unusual time period. So cost controls are very much on our mindset as we go through this time period as well.

If I could just clarify as well on Bretts question, you said that.

A lot of the impact I think for the P.S. cuts in the second quarter, but but I think it would make sense that you're guiding for probably weaker earnings through the year is that fair.

Yes, most of the impact in the a in the guide is a the impact will be discussed in the second quarter as we look to the second house, where the yeah. Obviously, there's a there's a very wide range of potential outcomes that so a you know we'll see how that plays out and obviously when they're on this the next earning call 90 days from now.

I will have a lot more to say about the SEC off but it yet but a lot of the commentary we had and a lot of the uptake in the guide relates to what we'll see and a into Q, but we will see some of those revenue impact. So you think about international Roiling for example will stay with us for a longer time period, but we'll well.

Jason the talk more about the second half of the year, when we have better visibility into them.

That helps thanks guys.

Yeah, Thanks, Phil Hey, Brad we're ready for the next question.

The next question is from David Barden of Bank of America, You May go ahead.

Hey, guys. Thanks for taking the questions and I guess to like the first just kind of looking at the slide 17, where you give us kind of the covidien environment effect on the mobile business could you give us some so that similar color consumer SMB and enterprise on the wireline side.

And then second obviously last quarter, Yeah, there was a big investment in the business services group in terms of trying to modernize the tech.

Go to market capabilities could you kind of elaborate a little bit on what's been accomplished thus far in that exercise and kind of what in the current environment your expectations might be for the return on that investment at this stage. Thanks.

Yeah.

Thanks, Dave that's.

Is there something like those those starting off with the wireline impacts on the the current environment in files, Yeah, we talked a little bit about that we saw good volumes and a internet and the first quarter, but that was largely reflection of of low churn as we came into this and obviously a lot of appreciation from a customer base.

The quality of the fives Internet product as you go into the second quarter, you're going to continue to see the benefit on the churn side, but obviously, we'll have some impact on the gross adds aside from the the employee actions that Hollums mentioned, where we're not allowing employees to oriented customers hubs, what's really good or what you.

See from US is say, okay, how do we react to that so haunts talked about the files in a box right. That's not let this environment completely stopped what we're doing how do we you know yes, there's an obstacle in Hawaii as find a way around at this team is phenomenal at doing that so we will have some gross adds here in the quarter that we might not have expected when we first stuff going into customer.

As.

As you look across the other parts of wire line as you get into SMB and a the larger businesses, obviously as we've seen an uptick in usage across the core networks.

And we've been doing a number of things to help especially larger enterprise customers adopt very quickly. The having there are a large number the employees work from home and having to update their systems to be able to handle that changing network traffic or where the work is before.

So I would expect to see a continuation of that but and it was massively change the ongoing wireline trends revenue trends that we've seen across the business as we think about second quarter ahead.

In terms of the investments in VJ and what you see in the margins at the in the first quarter that that we we came in a with a a decent margin for that group, but as I said on the on the the coal back in January of this isn't a one quarter investment in the business, there's a number of things that.

We need to do too.

Upgrade to the capabilities about business groups. So that we can be that partner of choice.

With that business is as we entered the fourth industrial Revolution, and so there's a lot of good activity going on there and I'll stick with what I said on the last call that a well be investigating that for quite awhile here, we should start to see the impact the benefits on the cost side towards the end of this year and then a the impacts on the revenue side.

In 21, and really getting full steam and 22, so lots of column there and at Hollins I'll, let you a follow up all that.

Oh, yes, actually can right not a these days and we are working together on this back to give some pieces group and just want to remind all of you. We brought together seven different groups on wireline and wireless on the decide to go to market time into team has a very limited stress didier or doing to transformation that smoke.

Slowdown we continue with that because then coming into these Colby 19, we see even a and more importantly over the horizon based this group and on new OEM that talks about Dcs bundled to address we see that we we had a great opportunity going forward asked would be less at Verizon eating intended edge network asked me confident five.

And that trend seen the industry I'm going to get done assays and all that which of course has been accentuated in these cold in 19. So I think good Buffalo doing here. The team is running as fast as they can we do you sense, we'll nation, but does not said these they sold the one corporate team, but we don't know told him back when it transformation on that.

Transformation, we sat and wanting best along the investment was of course of new games, which will have the hardly enough portfolio for for a couple of quarters. That's a distribute there but as these turned out we felt that there was to Google, but you need to actually make that was you shut and we had been testing that it's a great product and.

We speech that Im talking go to market in the Verizon business group, but I also see does a great deal, but you'll need to fortify was ultimately if I get to and so we will have a lot old low latency enormous to both were beating you and.

Transcoding will be important so yeah, adding that that's a d. So it's important for the future. So once again, we see good about our strategy and rice and beans. This group spend all that before and Ah. We have some more wants to be Dom I went on holding back on that transformation I stuck with us an even stronger position window when Doug.

Thanks, guys.

Yeah, Thanks, Dave Hey, Brad we're ready for the next question.

The next question comes from Simon Flannery of Morgan Stanley You May go ahead.

Good morning, Thanks for all the color on the the code 19 very helpful. I Wonder, Matt if you could get into a little more on the bad that help us understand where that is across the consumer versus business I'm guessing a lot of its in SMB.

Hi, this outbreak wireless wireline and then.

Could you talk a little bit about the digital channels, you talked a lot about files in a box how you're thinking about maybe pushing more of them off the phone sales in wireless sales through the online channel where are you today and what can you do to increase that percentage. Thanks.

Thanks, Simon so on the bad debt as we as we look for that the vast majority of it sitting in the human side, just because of the relative.

The difference in the size of the businesses between consumer and an S. M. B a as we did the a that bad debt reserve. This year, we we're now operating onto the new.

See so a lot of accounting standards. It requires us to take a multiple would look at a unexpected losses and so really what we did we too we looked at how many customers of availed themselves of the pledge, we used to asses Oh style standpoint for the reserve.

I can tell you guys gave around mid April we have around 8000.

Customers, who have signed up so the a the plays in some of the various other staple what is the vast majority of those are in mobile and that's a you know that provided some of the basis, but it's too early to work to know exactly how the bad debt requirements will play out we'll monitor that closely here as we goes forward, but certainly we're seeing a.

Ah different payment patterns across different parts, you got customer base or actually encouraged by what was sitting on the consumer side here over the last couple of weeks and another proof point that says we talked about in the past as we saw in the financial crisis that consumers continue to put their a this phone bill I out there.

List of priorities for payments and certainly we're monitoring closely on the on the business side, especially with it asked them be how that's going to play out nothing.

Nothing in the payment patterns at this point is.

Overly pessimistic, but we're obviously going to stay very close to that and Oh, well to keep our relationship with our customers.

Wherever possible so.

So hopefully gives you a little background on the I would look at the bad debt and all that Hamzah answer the question on how we see digital channels going forward.

So let me just a layout how we run the company right, where basically run that a company and a three pronged strategy. The first the bromine is of course, the crisis management, where we had a team that is dealing with all the chinacaches would that make brought him leads for our customers.

And what is the site that large second the I've done my daughter do my leadership team around the business as usual.

Our five D governance earlier this week when went through all the deployment that will define the moment edge computing old and new business cases yields Romney as normal.

A team, which also thinking about the new normal what will be the new normal when we come out some of these pandemic and well known that question, which is I think I I believe it's going to happen, we want to see much more detail or sort all the only shannon from our customers. We are ready for it but would it be that students we probably go.

As he another environment. The it work environment that we need to think we probably going also see a a different type of products that we need to pay put forward. So I I tried to see that all deep tree or problems are working at the same Tommy in order for us to come off even stronger.

From diesel crisis, as well as managing that that's a day I'm not missing auto targets I put up I guess when asked not issuing that price at the same time. So I can only come from I. I was saying, let's see any S.U.S., we want to see much spoiled they get done a usage, So Oh award range.

What was just want to see things that whenever silicate posted 11, and the health will increase all the time people that knowledge to still they don't need to go to hospital, we want to see a education remote education growing because people see that is actually working all that's going to be new normal where we will all where assets are extremely important do not believe leery to all our.

The group so you need to work on all three of them, we'll work in all three of them to come easy even stronger outs on these crisis.

Thank you.

Yeah. Thanks, I'm in Hey, Brett we're ready for the next question.

Thank you. The next question comes from Craig Moffett of Moffett Nathanson you May go ahead.

Yeah, Hi.

I Wonder if I could just to ask a slightly longer term question in the comp in the context of the covert crisis.

Your your investments in in wireless, which have largely been a inphi in fiveg I mean, it which have largely been on the backup millimeter wave spectrum of almost necessarily been in dense urban gathering places like stadiums and arenas in airports and what have you.

Which is obviously where people aren't today.

Do you do you stop and say there there may be a real change in in social patterns that suggest a different set of investment priorities <unk> that are more along the lines of.

Of coverage and less around dense urban usage or where is that likely to be sort of a short term blip just given how long the planning windows are for network Densification I I ask this in the context of of spectrum strategy.

Where it could well be that that mid band spectrum becomes even more important now given a potential pivot away from those very dense urban gathering places.

Thank you Greg.

It seems to be seen the first of all or what we need to be the social Aspen, so that thought I see it.

Calls for them that ER.

Dan standard scenarios, we continued to be down started scenarios or anti bonus we still see local use season dense urban areas that we see less moon until people because they're staying home so people leave where they live today. So we're not changing distressed about how we execute both on the owned a broader nation.

<unk> as well on our CTO deployment and ultimately we see that that's being a very compelling offering a goal going into future Oh on didn't meet the band.

Said before especially on the C band, we see that Ace and attract did the.

Spectrum, because first of all want us to sandy.

The it's a good coverage, but it will say, it's a global then roll things down number five d. and of course, we want to be part of that down. There. We are encouraged by Ansys east them to conduct as he bundle Wilson in December and we will always do are no return on investment or between the different dancing.

Occasions buying spectrum, putting more software and keeping in mind that we won't have continued to have the same headroom seemed to netbook us mall in order to have the best network. So yes, they see in Italy to be too early to say that we want to have it say is changed told to social patterns in the United States.

He should I don't think so people leave word elite and that's when it continued to be to say.

And can you comment specifically about D. L band Uplink concept and the availability now of legato spectrum.

Yes, I can or at least having some views on it we of course, the holding well basis. He has come off when we see the feeling that there are.

Several challenges within the bounds as a first of all they told us that frequency is not youth anywhere in the word that means that there are no way, we know onset done things like that which you need an ecosystem that's doing well work done.

As we know what frequent there's an older spectrum where of course looking into it and we have done it for seven years and if it's nothing do you think they'd be gold that's been wrong runs at about 10 years. So there's nothing new wells. So we'll continue our engineers are always looking into new development, if something can happen, but so far we have seen a little bit more.

Had we done anything out of some that's about.

Thank you.

Yeah. Thanks, Craig.

Brad we're ready for that question.

Thank you. The next question comes from Kols, We signed the sale of Cowen Your line is open.

Oh, great deal if I may 1st off I was wondering can you give us a number of customers that have stopped paying their bills I guess, specifically their wireless bills.

As a result of coven 19, and I assume that that number was included in your disconnect. You mentioned I think 800000.

In response to Simon's question is trying to understand where that number comes into play.

And then secondly, as it relates to.

Free cash flow in the dividend I was wondering if you can use give us some framework in terms of how to think about the potential dividend payout I expected in 2020. Thank you.

You can start if you're on mute.

Sorry about that.

Very helpful.

Thanks Toby.

So the number they test and those who Ah Ah I refer to in the prior question was the number of customers who have told us their ability to pay that builds has been impacted by the by cosy, that's not to say that being disconnected. They haven't been disconnected I just like every other customer that doesn't play a completely on time that we work with.

Them into the vast majority are those we end up.

Getting them back on a payment schedule and they continue their relationship with us. So we happened to and even those who have provided themselves are that doesn't necessarily mean that they have completely stopped.

And they are just indicating to us that theyve seen that impact, but when you look at the total impact we've seen a when I compare it to some of the numbers reported by a whether be on the mortgage side or the auto loan side, where we're seeing a a better overall performance.

In terms of the customer payment profile than what we've seen it that's consistent with what we saw window into financial crisis in 2008, as well I mean, we have a very important product or.

Customers and a they value it they value the connection they get from the best network and we see those show up in a in the payments. So on something you want to make some comments around the second question on free cash flow.

Yeah first of all Oh, I think we've talked about.

Where we stand on the balance sheet and a great work the Tms downward about actually small phone in the last couple of years, but going into first quarter. We've seen that we're in a very good.

Well see soon with our what our balance sheet done and that can be seen that's where both increased our capex this quarter as well as made that acquisition all new games, we have our capital allocation.

I worked is very clear for US number one is the base. This number two is the Sheryl this creates a debt reduction and before ace ER buybacks and that we see and that's where it really good situation to continue to put our board in the right position to serve our shareholders would be but then a bump off with add on the.

On the Investor day, when it comes to buybacks, that's broken down like the happening this year given the situation, but the will under a priorities. We are definitely very good procedure to serve at this moment.

Okay. Thank you told me.

Yeah. Thanks Colby.

Hi, Brad we're ready for the next question.

Thank you. The next question comes from Michael Rollins of Citigroup. Your line is open.

Thanks, and good morning.

A couple of follow ups first you gave a lot of how the potential impact on revenue and was curious if you could provide some additional details to quantify or help to approximate the variability of wireless wireless expenses to the variability of gross adds or overall device sales and instead.

Secondly doesn't temporary use of other license holder spectrum increased rising interest to rent or at least spectrum on the commercial basis in the future. Thanks.

Thanks, Mike So I'll answer the first question on the variability of expenses is so obviously as we have lower volumes and see lower handset costs that that obviously at office. The a closed for immediately but a lot or the other expenses as you think about India India.

Immediate term don't necessarily move even promo costs for example, as we've talked about before we now were under rose six so six amortize love the promo expense over the expected life. So you see that come across over two and a hockey is typically a this is an immediate cost so if we get.

<unk> reduction that benefit of lower promo expenses also gets amortized over the over that time period in the income statement. So you know that you're going to see that flows through that other areas, where do you see an impact from volumes that when we have lower volumes, especially in store, we see lower accessory sales.

And those are those typically have a good margin on a week and so there are a impacts there as well from Saint Louis I was not just in terms lower expenses, but there is an impact on the on the revenue lines I couldn't come with that so net net you do see a reduction in costs with a with low volumes, but this mother.

Things that are are they going the other direction and some other benefits and expands they're going to get realized over time, rather than immediately in there. So hopefully that helps you think around how that shows up in the in the income statement onto I'll, let you a follow up on the question on the the spectrum that we we took advantage of.

Yeah first of all the way we want to thank you have to see for so rapidly come out on the lending out the spectrum to all the players in the market because nobody knew how the usage would be on the net gas you can see E. When we exclude the temporary spectrum that we left.

We have at the same headroom on the net congrats.

Don't worry when on top of that we'll of course, a adding capacity right now.

I also would deem that he assess the dynamic spectrum Cherry, which I can report that the tests are going well. We're on plan for <unk> thing that Oh picture when it seemed to unsolved tami and rolled on to decide when they want to turn on ER.

A nationwide so I think where the very good spectrums capacity and with respect to what Barry I would it but we're going to continue with that so I think back to where <unk> right now.

Thank you.

Yeah, Thanks, Mike Hey, Brett we have time for one last question. Please.

Thank you. Your last question comes from Jennifer Frenchie of Wells Fargo. You May go ahead.

Great. Thank you for taking the question hands I just wanted to follow up on you. Yes. That's common so if I go back to my notes from mid February.

They seem like you are very.

Anything viasat by year end with Nike with by year end, but yes that is there any change that and then just on the infrastructure behind <unk>. You also talked about our title talks about five times the amount of milestones.

I see this year has any of this yes, given the changes in social pattern shifted back Max out there. Thank you.

Thank you you had it for our first of all the we feel good about the dynamics spectrum sharing or.

So it will or will continue to do to test done deploying the equipment on the hardware into feed that is needed for doing that I'm certain that the cod and if he will.

We put that into hands on rolling on time and decide when its own it's all need to second all that's where a lot today. So were not the and then the and the supply users to doing that or supply chain issues. The same both whatever five times or more.

Hi, Joe Ragan base station. These here, we we continue to use to accelerate done and then Kyle actually said publicly that we were a handle the non when we ended March I can say today, we're still on plan on that's why they are well no supply chain you still have of course called the patients said, we'd some municipalities.

Our team you saw older all nothing working wouldn't undecided finding new ways didn't get an approval the things that will never thought where.

Do you get turned it permitting process as I said that would which will never thought were poster boards. So all in all we're not giving up on those targets and so far it looks really good that that's how it companies you would execute in times like these not anything the crisis see nothing to be a you and refi Oh. A then you would normally would look like I'm not slipped my team.

Doing everyday right now and we're very focused on doing that on the good thing if that we feel good about our strategy, which sounds.

Thank you.

Yeah. Thanks, Jennifer Thanks, hogs and team and everybody make sure you stay safe and be well end up with that we'll close the call.

Ladies and gentlemen, this does conclude the conference call for today. Thank you for your participation and for using for isn't conference surfaces. You may now disconnect.