Q4 2023 Verizon Communications Inc Earnings Call
Unknown Executive: Good morning, and welcome to the Verizon 4th quarter, 2023 earnings conference call. At this time, all participants have been placed in a listen only mode, and the floor will be opened for questions following the presentation. To ask a question, press star one on your touchtone phone. If at any point your question has been answered, you may remove yourself by pressing star two.
Unknown Executive: Today's conference is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to turn the call over to your host, Mr. Brady Connor, Senior Vice President and Vestor Relations. Thanks, Brad.
Brady Connor: Good morning, everyone, and welcome to our 4th quarter earnings conference call. I'm Brady Connor, and I'm joined by our Chairman and Chief Executive Officer Hans Vestberg, as well as our Chief Financial Officer, Tony Skiadas. Before we begin, I'd like to draw your attention to our safe harbor statement, which can be found on slide two of the presentation. Information in this presentation contains statements about expected future events and financial results that are forward looking and subject to risks and uncertainties.
Brady Connor: Discussion of factors that may affect future results is contained in Verizon's filings with the FCC, which are available on our website. This presentation contains certain non-gap financial measures. Reconciliation of these non-gap measures to the most directly comparable gap measures are included in the financial materials posted on our website. Earlier this morning, we posted to our investor relations website a detailed review of our 4th quarter and full year results. You'll find additional details in the earnings materials on our investor relations website.
Brady Connor: We'd like to note that Verizon's 4th quarter reporting earnings per share were negatively impacted by a number of special items, which are discussed in the written remarks available on our investor relations website. The largest of the impacts was also disclosed in our 8K filing last Wednesday, excluding these special items adjusted EPS for the 4th quarter was $1.08.
Hans Vestberg: With that, I'll turn the call over to Hans. For us, 2023 was a year of continuous improvement and important actions across the business. We made significant changes to how we operate and to our team. And those changes paid off.
Hans Vestberg: We stabilized our core business and positioned the company for a new growth and profitability. We built strong momentum quarter of the quarter, culminating in a very good holiday season, and finally, we met the guidance that we provided to you in each of our key performance indicators. Entering 204, Verizon since ready to further unlock our performance potential at an accelerating rate. We now have all the assets, the best team in the business, and the focus on continued operation and excellence to deliver even better results going forward.
Hans Vestberg: Let me share some full-year highlights with you. Winerservice Revenue for 2020 was $76.7 billion, $83.2% year-over-year increase. We delivered outstanding volumes during a healthy fourth quarter where our customers clearly embraced our offerings. We also reduced our year-over-year leverage while continuing to bring KPACs back towards business as usual levels, these aligns with the capital allocation priorities we have shared in recent years. These results provided solid foundation for Verizon's journey and future success, and I'm pleased that we put a leadership in team in place last year that would serve Verizon's stakeholders well in both the short and long term. We as a team have focused on capturing the market opportunity, and I'm proud or progress in 2023.
Hans Vestberg: Just two weeks ago, Leslie Berlin joined Verizon as a chief marketing officer. I'm excited to bring her on board and have a great confidence in her ability to continue shaping Verizon's premium brand perception and story. We started 203 determined to differentiate ourselves by investing even more in profitable growth while transforming Verizon to make the company more efficient and effective. Seeing the continued strength of the US consumer, BC a holiday store traffic, and rising demand for mobility, growth and private networks, we also took actions to fuel growth during the fourth quarter and it showed in our results.
Hans Vestberg: A standout milestone in 2023 was our launch on my plan, which was designed from extensive customer research to be the most flexible plan available to US consumers from any wireless company. My plan has been a great success that has seen stellar adoption. Introduced in May, we're ordered to have 13.1 million my plan subscribers, and these customers using premium packages and are unique perks driving ARPA. Other changes we made in 203 include establishing a regional distribution model, tailing our approach to every market, revamping sales composition to support productivity and introducing new price plans and promotions in consumer and business.
Hans Vestberg: Verizon Business also partnered with HL Tech to be more efficient to deliver post-sale implementation and customer support from managed network services, enhancing our customer service while saving Verizon money. These actions paired with all of our assets set us up very well for 2024. We are now working from an effective model and this is just a start.
Hans Vestberg: Overall, the wireless industry is strong as we head into 2024 and we are confident in our strategy. We have great offerings with optionality to meet the needs of customers of anybody on the best network in the country. Now, let me share a bit more of each of our service performed in the fourth quarter.
Hans Vestberg: Starting with mobility, we have 449,000 post-paid phone netdads, driven by improving netdads in consumer and a continued sustainable performance in Verizon business. Our disciplined and segmented market approach is working with customers and creating great economics for our shareholders. In consumer, you can see the pattern of continuous improvements from the start of the year. In the fourth quarter, we deliver our best post-paid phone gross ads performance since 2019 and our best netdads in two years. We add the 318,000 post-paid phone customers in the fourth quarter and our gross ads were up almost 17% year over year.
Hans Vestberg: It is clear that we have momentum in consumer as we move into 2024 and we will continue the work to get our fair share on new business. Our customer centric offers are resonating in the market and we are just getting started. By leveraging Verizon's large subscriber base and cheap partnership, we can deliver exclusive discount offers like Netflix and Max for just $10 a month, underscoring our industry leadership in value-driven content offerings.
Hans Vestberg: With our vast network coverage and the largest base of loyal customers, we are uniquely positioned to provide targeted high-value deals that deepen relationship across connected devices streaming and more. Within the value-business, which includes our prepaid offerings like Trackphone, Visible and Total Overrise on, we still have work to do but are making progress. Moving to overrise on business, the team continue to deliver on mobility with total post-paid phone netdads of 121,000 for the fourth quarter 2023. Marking our 10th consecutive quarter of post-paid phone netdads above 125,000.
Hans Vestberg: For the full year, business added 562,000 phone netdads and outstanding results. Our business customers are prioritizing mobility and value the optionality offer with highly tailored plans on the best network in the country. Now let's turn to broadband.
Hans Vestberg: For the year, we had more than 1.7 million broadband netdads with more than 1.5 million netdads from fixed wireless access and 248,000 netdads from FIOS, a nice increase over 2022. On fixed wireless access, we're consistently adding more than 350,000 subscribers per quarter, which is part of our plan for steady, sustainable growth that exceeds what we expected at launch. Just three years of the launch, we serve more than 3 million fixed wireless access customers.
Hans Vestberg: Well ahead of our stated goal of 4 to 5 million subscribers by the end of 2025. With fixed wireless access, we're expanding into new markets and proving the value of Verizon's connectivity. Customers are finding strong reliability and speed in fixed wise access and that shows in our results, including a very strong net promoter score. For a product that still is in the beginning, the pace of adoption has the team super excited.
Hans Vestberg: We expect this will be a long-term source of recurring revenue for Verizon and we're emptying this year with a strong base for continued growth. And Newcore, one of the country's largest steel companies has us building private networks for three of its sites with more to come over the next year.
Hans Vestberg: Strategically, we're building a new source of revenue expansion where we are the clear leader. Last year, we're also expanding existing five-year private networks partnerships with NFL to bring new spectator and retail experience to fans everywhere. When we build relationships with these large enterprises and they see what our network can do for them, there's always potential for more business and our network is just getting better and better every day. With full access to our spectrum as of the end of the third quarter last year, our mission is to optimize the experience in every market and expand into suburban and rural markets.
Hans Vestberg: Where we know our consumer and business customers are eager to take up our offerings. We have been expanding and improving our networking key markets through 2023 and into this year. I have said it before and I will say it again.
Hans Vestberg: Our network is the foundation how we offer the best value and premium experience to our customers. And we're now seeing our investment in CBAN paying off in terms of customer experience and loyalty. Where we have CBAN, we see higher gross ads, lower share and more step-ups to premium services. We also see increased uptake of customers taking both mobility and broadband services. Meanwhile, millimeter wave, which we have now deployed in many urban areas and all 30 NFL stadiums sets Verizon apart with an outstanding performance at high-density areas and public event spaces. And for the 32nd consecutive time, Verizon was the most awarded company in the country for wireless network quality with the first place rankings in each of the 80 power six regions.
Hans Vestberg: We are the network that America relies on and we take that commitment very seriously. Looking ahead, our priorities for 2024 are crystal clear. We remain laser focused on growing wireless service revenue and expanding our adjusted EBITDA and free cash flow to allow for our meaningful debt reduction in the year ahead. This is what our whole team is working towards and what you are shareholders and our board want us to focus on.
Hans Vestberg: Tony will have more details for you but we anticipate strong wireless service revenue growth of two to three and a half percent in 2024. Which reflects our ability to sustain the top line of our business as we continue to pursue the right balance of profitability and customer growth. Joseph, for adjusted EBITDA profile, will continue to improve as we become even more efficient with growth, cost saving measures and our disciplined promotional spending.
Hans Vestberg: Our capital allocation priorities remain consistent. And as we lower our capital intensity from the C band build down and our new business structure, we expect to see continued strong free cash flow generation going forward. That will enable our board to continue to raise our dividend and also enable us to bring down leverage.
Tony Skiadas: Now, Tony will discuss the quarter, as well as our operations and guidance in more detail.
Tony Skiadas: Thanks, Hans, and good morning. Executing on our plan, we finished the year strong and delivered on our financial guidance. We exited the year with good momentum and remained committed to our three priorities of growing wireless service revenue, adjusted EBITDA and free cash flow. In 2023, we set out to improve our operational performance while sustaining financial discipline.
Tony Skiadas: Our fourth quarter and full year results confirm that our strategy is working and that we can deliver strong financials and improve key operating metrics. Consumer post paid phone net add total 318,000 for the quarter, a substantial improvement of 369,000 sequentially and 277,000 compared to the prior year. Our consumer post paid phone churn of 0.88% represents a stable result even after we implemented over $1 billion of annualized pricing actions in 2023. While we do not provide specific guidance on volumes, we wanted to share a couple of items as we look into 2024.
Tony Skiadas: In the first quarter, we are taking additional targeted pricing actions that we expect will result in incremental pressure on consumer post paid phone churn in the period. However, we expect to deliver positive consumer post paid phone net add in full year 2024 as we execute our strategy of growing our subscriber base while being financially disciplined. Post paid phone gross add in the quarter were up nearly 17% year over year. This represents our best quarterly consumer gross add performance in four years. Our attractive my plan offers combined with our segmented approach to the market regional sales structure and discipline promotional strategy continue to deliver strong results.
Tony Skiadas: Additionally, post paid upgrades remain lower as compared to the prior year. The consumer post paid upgrade rate was 4.4% in the fourth quarter down 120 basis points year over year as a result of approximately 19% fewer upgrades. As Hans said, we continue to see better performance in markets where we have deployed C-band. In our first 76 C-band markets, fourth quarter consumer post paid phone gross add growth was 8 percentage points better than in non-C-band markets.
Tony Skiadas: Additionally, consumer post paid phone churn in C-band markets was 4 basis points better than in non-C-band markets. The strong momentum in the quarter combined with the continued deployment of our C-band network positions as well in 2024. The quality of the business we are writing consumer remains high as my plan continues to drive premium plan adoption. The premium take rate in C-band markets for the quarter was more than 10 percentage points higher than in non-C-band markets.
Tony Skiadas: Davis, Consumer Arpa of $134.10 represents an increase of 4.7% year over year. This was driven by new customer additions, premium planned adoption, and fixed wireless subscriber growth. We expect continued and healthy organic arpa growth in 2024. Our prepaid results remain challenged in the fourth quarter. This is in part to seasonally weaker national retail sales volumes, which is the primary sales channel for our track phone brands. We also continue to see pricing pressures from low end postpaid offerings.
Tony Skiadas: Prepaid net losses for the quarter were 289,000. During the quarter, we saw continued strong growth within the visible and total bivorizing brands, which we will continue to scale. The team is also focused on our partnerships to improve the performance of the straight talk brand. We believe we're taking the right steps to better position our offerings in the market and expect to see some stabilization in 2024. Verizon Business delivered another strong quarter, with 131,000 phone net ads, which, as Hans mentioned, is our 10th consecutive quarter above 125,000.
Tony Skiadas: The business markets group had its best phone net ad performance in the last two years, demonstrating our value proposition is resonating with small and medium businesses. Similar to consumer, we are taking pricing actions in the first quarter in business that could result in elevated phone churn in the period.
Tony Skiadas: However, we are confident that we will continue to deliver strong business volumes in 2024. Moving on to broadband, we delivered 413,000 net additions in the quarter, continuing the pace of over 400,000 broadband net ads for the fifth consecutive quarter. We see strong demands for both our fiber and fixed wireless offerings, and we continue to see positive responses from customers regarding the quality and reliability of our services. In fixed wireless, we delivered 375,000 net ads for the quarter, growing the pace to over 3 million subscribers. We launch C-banded early 2022, and our fixed wireless success in the last two years reflects a strong demand for high quality broadband and the strength and reliability of our product.
Tony Skiadas: Notably, in the fourth quarter, over 80% of our consumer fixed wireless growth ads came from C-band markets. The growth trajectory from fixed wireless continues to be robust, and we are head of schedule to achieve our 4-5 million subscriber goal by year end 2025. Fios internet net ads were 55,000 down 4,000 year over year.
Tony Skiadas: We are pleased with the success of Fios with strong growth ads and retention, reflecting the quality and overall value of the product. We expect broadband subscriber momentum to extend to 2024 as we continue deployment of our C-band spectrum further expand our Fios footprint and bring new products and offers to the market. Let's now look at our financials. Consolidator revenue for the fourth quarter was 35.1 billion dollars down 0.3% year over year.
Tony Skiadas: This change can be attributed to the wireless equipment revenue which was approximately 2% lower than the prior year as total post paid upgrade declined by approximately 18%. Total wireless service revenue was 19.4 billion dollars of 3.2% year over year. Strong revenue benefited from targeted pricing actions, more customers selecting premium unlimited plans and growth and fixed wireless access. This was partially offset by pressure from prepaid, which reduced total wireless service revenue growth by approximately 70 basis points year over year, as well as promo amortization.
Tony Skiadas: Consolidated adjusted even in the quarter was $11.7 billion, a decrease of 0.6% compared to the prior year. Higher wireless service revenue and the benefits of lower upgrades were more than offset by higher marketing and bad debt expense and ongoing declines in business wireline revenue. Adjusted EBITDA margin of 33.2% was relatively flat year over year. In 2023, we implemented transformations within our consumer customer care group as well as business managed services.
Tony Skiadas: We are pleased with what we have achieved this year and our cost saving measures are meeting our expectations. We expect further progress on our cost efficiency program in 2024. Adjusted EPS was a dollar eight in the quarter, resulting in full year adjusted EPS of $4.71.
Tony Skiadas: Turning to our cash flow summary, cash flow from operating activities for the fourth quarter was $8.7 billion, bringing the total for 2023 to $37.5 billion. This marks the year over year improvement of over $300 million, primarily due to working capital improvements. CapEx for the quarter came in at $4.6 billion, compared to $7.3 billion in the prior year. The full year CapEx totaled $18.8 billion, which represents a more than $4 billion reduction in capital spending from 2022 as we come down from our peak seed ban spending level. Free cash flow for the fourth quarter was $4.1 billion, bringing our year-to-day total to $18.7 billion.
Tony Skiadas: A $4.7 billion increase over the prior year driven by operational improvements and the lower CapEx spending that we previously noted. We are pleased to have delivered on our guidance of more than $18 billion of free cash flow for the full year, which reflects our balanced and strategic approach to delivering profitable growth. Net Unsecured debt at the end of the quarter was $126.4 billion, a $1.6 billion improvement year over year. Net Unsecured debt increased sequentially, primarily due to settling the $3.7 billion in sediment payments to satellite operators for our remaining seed ban spectrum. Our net Unsecured debt consolidated adjusted EBITDA ratio was 2.6 times as of the end of the fourth quarter in line with the prior two quarters.
Tony Skiadas: We expect the leveraging of the balance sheet to accelerate in 2024 as CapEx comes down to BAU levels and we continue to generate strong cash flow. Additionally, we continue to benefit from our approach to managing long-term debt and have only $3.6 billion of unsecured debt maturing in 2024. Overall, pleased with our momentum exiting the year and our performance in 2023 delivering an improved operational profile while also meeting our financial guidance. Now, I want to take a few moments to look ahead and walk through our 2024 guidance.
Tony Skiadas: Our 2024 guidance demonstrates our expectations for accelerating wireless service revenue growth. As a reminder, the reported 2023 wireless service revenue growth of 3.2% included approximately 190 basis points of benefit from a reallocation of other revenues. Excluding this reallocation, the 2023 wireless service revenue growth was 1.3%. For 2024, we expect total wireless service revenue to grow between 2% and 3.5%. This will be driven by anticipated positive post-paid phone net additions of both consumer and business, continued fixed wireless access subscriber growth, further adoption of premium unlimited plans, growth in products and services, and pricing action benefits.
Tony Skiadas: We expect consolidated adjusted EBITDA to grow by 1% to 3% versus the prior year. This outlook reflects expected higher wireless service revenue and the impact of our cost transformation initiatives, partially offset by continued pressure in business waterline revenues and increased wireless network operating expenses. Full year adjusted earnings for sure is expected to be $4.50 to $4.70.
Tony Skiadas: As noted, we expect adjusted EBITDA to grow in 2024, offset by certain below-the-line impacts. Specifically, higher interest expense is expected to impact adjusted EPS by $16.19, over 75% of which is driven by the continued reduction in capitalized interest related to the CBAN licenses being placed into service. In addition, EPS is expected to be impacted by approximately $7.9 of higher pension and OPEV expense, primarily due to the expiration of certain credits. This impact will flow through the other income and expense line on our income statement.
Tony Skiadas: We expect depreciation and amortization to be relatively flat in 2024 compared to 2023. Our adjusted effective income tax rate is expected to be in the range of 22.5 to 24% based on current legislation. As discussed in prior quarters, capital spending for the full year is expected to be between $17.7 billion down from $18.8 billion in 2023. While we are not providing guidance on 2024 free cash flow, we want to provide additional color to aid with your analysis.
Tony Skiadas: Tailwinds to free cash flow will come from our adjusted EBITDA growth outlook as well as the expected $1.5 billion reduction in CAPEX in 2024 based on the midpoint of our guided CAPEX range. Offsets will be higher interest expense and higher cash taxes. As a reminder, the majority of the higher interest expense relates to reductions in capitalized interest. Such interest was recognized in cash flow from investing prior to placing the seed band spectrum into service.
Tony Skiadas: The higher cash taxes are primarily related to the continued phase out of bonus depreciation in 2024 based on current legislation. Overall, we expect a strong free cash flow profile that will support our CAPEX and position us for meaningful, unsecured debt reduction in 2024, which we expect to come in the latter half of the year.
Hans Vestberg: With that, I will now turn the call back over to Hans for his closing thoughts. Thank you Tony.
Hans Vestberg: As you have heard today, we are confident and well positioned to deliver a solid 2024. Thanks to our best in-class network, which is only getting better. We offer the mobile and broadband services that customer value and need the most. Our industry is critical to the next wave of innovation, and Verizon is rated to capitalize on the opportunity of the AI economy to bring this technology to life for all our stakeholders.
Hans Vestberg: As I said in the beginning, where the right team in place to execute the next chapter in Verizon's history, I'm proud of the work our team accomplished in 2022. And I'm excited about what we will deliver in 2024. Our results in C-band market speaks for themselves and support our investment decisions, and we're going to lean further as we expand into suburban and rural markets while maintaining the financial discipline you come to expect from us.
Hans Vestberg: We will continue to say very close to our customers to understand their needs and preferences, so that we can offer the right promotions at the right times in the right markets. We are the right people, the right assets and the right strategy. Our focus for 2024 is on execution. It's a winning combination, and we are very confident heading into this year. Finally, I want to remind you that we are hosting an investment on February 5th, and encourage everyone to tune in to the webcast. Given the financial update today, next month will be more of an operational and strategic update on the company.
Unknown Executive: Not ready. We're ready to take questions. Thanks, Hans. Brad, we're ready for the first question. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one. Please unmute your phone and record your name clearly when prompted. Your name is required to introduce your question. To withdraw your request, please press star two. One moment for the first question.
John Hadlich: The first question will come from John Hadlich of UBS. Your line is open, sir.
Unknown Executive: Great. Thanks. Good morning, guys.
Hans Vestberg: I've obviously drilled down on the couple things. Firstly, the sub trends, 17% growth is some real momentum. I know, Hans, you talked about a number of potential drivers, but if there's anything you could sort of be specific and sort of talk about what drove that in the quarter, and is that likely to continue also the account growth? Is that likely to continue? And then you talked about some churn on the price increase. Anything you could say about sort of a net add momentum as you look into 24. That's first and maybe for Tony.
Tony Skiadas: You know, nice service revenue growth. Any additional info you can to give us to sort of unpack that in terms of the price increase impact versus last year and what you're seeing in terms of tiering. That'd be great.
Hans Vestberg: Thanks. Hey, John, thank you for the question. So let me start about the subs then.
Tony Skiadas: I mean, on the business side, 10th quarter in a row, more than 125,000 Kyler team is doing a great job. We are our network is performing so well. So our customers just continue to buy in with us. Not only that are offerings and our go to market is as strong as ever. So we feel really good about what Kyler team is doing on the consumer side. Yeah, we had a good 4th quarter, but you have seen also the year that we have sequentially improved all the time.
Tony Skiadas: Everything started where we started with a new offering my plan, which resonates with the market very much consumer insights in it. That on top of that or. That has done a lot of changes in our structure all the way from the go to market, the incentives in our stores and our decentralization of it. So it hangs together all the way. So I think the most important we have the right offerings in the market and that has really resonated on the consumer side. So I'm really happy with the team. We will continue to execute on the plan we have and we are started.
Tony Skiadas: Hey, John, it's Tony. Good morning. So just to add on to what Hans mentioned, we did really well in Tier 1 markets. As we mentioned in the prepared remarks about 8 percentage points better. And we were also net add positive in both Tier 2 and Tier 3 markets as well. You know, we improved our competitive positioning against old providers. You know, we continue to build out C band as we said earlier and in suburban and rural markets and we see further opportunity there. And as Hans mentioned, we have strong momentum in the VBG side as well on both mobility and FWA. So good results.
Tony Skiadas: And then on your question on service revenue. So we feel really good about the shape of service revenue in 2024. The guidance that we gave of 2 to 3.5% reflects accelerated growth. And we talked about the jump off point of 1.3% in the prepared remarks.
Tony Skiadas: The midpoint of our guidance range implies over $2 billion of service revenue growth. If we think about the assumptions in the guide in terms of tailwinds, as you know, we've executed a number of pricing actions, both in the back half of 2023 that do carry into 2024, as well as in recent weeks, we've taken further pricing actions in both consumer and business that provide a tailwind. We also have an improving volume profile in our consumer business.
Tony Skiadas: As we said in the prepared remarks, we expect to have positive phone net ads in consumer in 2024 and stable business volumes as well. And then the third tailwind I'd point to is an increasing contribution from fixed wireless access. We have really good momentum and over 3 million subs in the base. In terms of headwinds, prepaid has been a drag on service revenue, both in the 4th quarter and the 4th year is about 142 million in the 4th quarter.
Tony Skiadas: And we expect the prepaid headwinds to continue into 2024 as we stabilize that business. And then on promo memorization, that continues to be a headwind with the increase in 2024, similar to the increase we experienced in 2023. But when you put that all together, we'd like to trajectory of service revenue. That's great detail. Thank you guys. Yeah, Brad, we're ready for the next question.
Simon Flannery: The next question comes from Simon Flannery of Morgan Stanley. Your line is open.
Unknown Executive: Great. Thank you very much. Good morning.
Hans Vestberg: Just following up there on the fixed wireless. Could you just give us a little bit of color around how the churn is performing? What are you seeing in terms of those cohorts that have had this service for some time and any comments on sort of capacity and so forth? And also, are you seeing emerging seasonality in this product driven by strong back to school in Q3 and then maybe a little bit softer in Q4? And then anything you can color, you can provide on your exposure to ACP and how that may affect you and your latest thoughts on the beat program. Thank you. Okay. Thank you.
Hans Vestberg: All the fixed wireless access. I think the product is mature and we're not past 3 million service both on the business side and consumer together. Clearly, the rollout and the product is unique. It has, it's a resonate so good in the market. It's implicit of the product and installing it which was the, which was all right there.
Hans Vestberg: And even if we took out the discount that we had in the third quarter, we haven't seen any slow down. The product is resonating so well. We are constantly improving it. The MPS is really high on the product. And as I said so many times before, for us is to keep the same volume right now because that we are diminishing our capacity or capital in the best way. It's the most efficient way.
Hans Vestberg: So we will continue to be in these levels and we think they're very important. And hoping that of course that our consumers using fixed wireless access that they are using the network as anybody else. And as I said before, we have dimensioned the network to handle it. So that's not the challenge.
Tony Skiadas: And the most important for us is that we are fiberized all our network and so we can transport all the data. The guys are doing great job on fixed wireless access across the board. Yeah, then just one additional point there. So the longer dated Charren Simon is very strong and we're very pleased with the progress thus far.
Tony Skiadas: On your other question on ACP, it's just maybe a few points to make here. The guidance assumes that the ACP funding remains intact and the event, the funding goes away. We have plans to address it and we'll see what happens there. The majority of the exposure on ACP is in our prepaid business. We have about 1.2 million prepaid subs that benefit from the ACP program and that's less than 10% of our prepaid base. On the post-paid side we have minimal exposure to ACP, both Fios and post-paid wireless and the margin exposure from ACP is very, very small.
Tony Skiadas: On the deed program, we will participate when that comes out in the market where we see we can compete and where we see a good return on investment. We have already won a couple in the early stages but we expect that this will roll out. But again, we will see that you participate when it makes sense for us, usually or not usually, always, with financial discipline. Great and just the one who followed on the fiber bill is that again about 500,000 have passed this year. Yes, Simon, we'll be a little bit over 400,000 next year. Thanks very much. Yeah, thanks, Simon. Braveray for the next question.
Phil Kusik: The next question comes from Phil Kusik of JP Morgan. Your line is open, sir. Hi, thank you.
Unknown Executive: I think you said you expect post-paid phone positive for the year. What's the durability of consumer growth? Could that also be positive for 2024?
Hans Vestberg: And remind us the impact that price increases tend to have on churn over the last couple of years. And then second, maybe you could just dig into where your gross ads are coming from, the improvements as you're doing better there. Churn has sort of been in line, but gross ads doing a lot better. You could dig into that. Is there any significant shift in where customers are coming from, maybe from my plan? Thank you. Sure. I can't just start by saying, but they're going to hand it over to Tony.
Hans Vestberg: I think you're spot on on my plan. I said it in my opening remarks, you know, stellar performance so far on my plan. But it's not only that the plan is good. It's both flexible.
Hans Vestberg: You have cost control and our customers get value of it. And I think that goes back to what I talked about for years. Disciplined approach, but also very segmented.
Tony Skiadas: And that's what's happening right now where we can see that we allocate money to the right product, to the right customer in the right market. So there's a lot of that, but Tony will give you a little bit to round down on the numbers. Sure.
Tony Skiadas: So just fill on the on the chart. I mean, obviously we'll see a little bit of an uptick from the pricing changes we made in both consumer and in business and those changes were announced in the last few weeks. And then it's hard to mention.
Tony Skiadas: We really had good performance and consumer. You saw the gross ad number at 17% and 10% for the full year. And that's despite being in a much lower upgrade environment as well.
Tony Skiadas: So we feel really good. Like I said earlier, the tier one markets were very strong. And we see further opportunity as we build out CBAN. The chart profile is much better. The ARPA is much better.
Tony Skiadas: So we're very comfortable with what we're seeing so far with CBAN and the performance, and in terms of the durability of post-bid and growth there. Yeah, look, we said we're going to be a post-paid phone positive and consumer in 2024, and we'll also continue to see strong momentum in business as well. We did 562,000 that adds this year, and Kyle and the team did a great job, and we expect continued solid growth from the business side as well.
Unknown Executive: That's great. Thanks for everything, Gus. Yeah, thanks, Phil. Broward Ray for the next question.
Michael Rollins: The next question comes from Michael Rollins of City. Your line is open, sir. Thanks. Good morning.
Tony Skiadas: Just one more on wireless pricing. Can you provide some additional contact on how you're seeing the competitive landscape evolve with respect to pricing, and how Verizon is trying to balance the volume versus price equation as you look out from the recent pricing actions that you've taken. And then second, can you provide an update on how much the cost-cutting program yielded in 23 and how much you can capture in 24 relative to the previously articulated targets? Thanks. Thanks, Mike.
Hans Vestberg: I think when it comes to our pricing and our promotions, I think we look more about, we are the leader in the market, we look at the different segments we have, so see that we have the right offerings for our right customer with the right value. That's the focus we have had for, I would say the last two years, very much focused on our customer base and the consumers and the customers we can attract the Verizon.
Hans Vestberg: So far, that discipline, the approach we have, as you saw the fourth quarter, for example, we invest a little bit more because we have really good momentum, so sometimes we're going to invest more, but it's always going to be with a return on investment in mind to see that we're doing the right for all our stakeholders. So that's a focus we have on the pricing, we have both on broadband and on wireless. On the cost program, 23 was a big year for us.
Hans Vestberg: You probably follow in all our press releases, but we did a lot in customer care, we did a lot with the managed services, without sourcing the HL. We implemented some really large IT systems and the application that's going to be a fantastic platform, we continue to deploy our offshore centers and being even stronger using that as a platform on the basis that we created the Verizon Global Services, the first of January, 23. So I'm really pleased with the platforms and that means we're on track for the savings we talked about going into 24, it's more about the same. Tony, sure.
Hans Vestberg: So just a couple of things here. So on 2023, we delivered about three to $400 million in savings and as Hans mentioned, we expect the program to ramp in 2024 and the savings are contemplated in the guide. Portion will hit the bottom line while also giving us the flexibility to invest in the business and I think you saw that in the fourth quarter and the results speak for themselves. We're not going to give specific cost targets, but in addition to what Hans mentioned, we have work going on in IT platform transformation, real estate and fleet optimization and world opening up a shared service center in Ireland.
Hans Vestberg: So we feel really good about the cost actions that are driving the the bit improvements that you see in the guidance for this year. And just one other, where are you in the process of restructuring the business wireline operations and how close are you to an inflection where that segment can stabilize financially or potentially eventually grow at some point. Thanks. Thank you, Mike. No, that's a big focus for us. We have the secular decline and we've had that for quite a while.
Hans Vestberg: So that's nothing new and nothing new to that. But our cost efficiencies, of course, happening very, very quickly and the team is doing great job. Not only that, we also see that we have the right pricing for our customers and also seeing where we don't have great contract. We have decided to walk away from them.
Hans Vestberg: So very much tackling, blocking and tackling to see that we're continue to improve. And of course, our target is to get that to sort of being neutral to our to our PNL over time. And that is one of the important pieces for getting the 25% of the Verizon business group in Ibiza. But not only that, of course, we're offsetting that by growing our wireless business and our broadband business. So typical management with product portfolio, and I would say Kyle and the team is doing great job with the full support from Tony and me. Thanks. Yeah, thanks Mike. Right for the next question.
Frank Louthan: The next question comes from Frank Lousen of Raymond James. Great. Thank you.
Hans Vestberg: So you made a lot of changes in the last year to kind of retail marketing to correct some of the past periods. Now we've got a new CMO. So what can we expect her to be doing differently? Should we see this as another reset or change of direction? How should we think about that adjustment? Thanks. You're right.
Hans Vestberg: Last year we did the local changes, but looking at the result, I think many of the changes was absolute to write all the way from our structural changes to go to market, the products. And also we did quite a lot of management changes getting the many of the executive in new positions, including then recruiting a new CMO in Lesley, Berlin. We're excited to have her own. I think where we are with our brand and with our offerings were a great place, but you know, you cannot sit still here and that's why we recruited Lesley.
Hans Vestberg: Lesley will work with the full team to see how we continue to refine the leadership in the brand because we're the number one brand in the market. We're just going to refine that, but we're not going to see it still, you know, so I think Lesley has been over two weeks. So I see a lot of great initiatives and ideas and we will work together with her to make these company even better. Okay, great. Thank you. Yeah, thanks Frank. Bravery for the next question.
David Barden: The next question comes from David Barton of Think of America. Your line is open, sir.
Unknown Executive: Hey guys, thanks for taking the questions. A couple of I could just the first, you know, you went out of your way to highlight how well fixed world access is doing in the CBAN markets. You know, these are kind of the main markets, probably the densest markets.
Hans Vestberg: Obviously, we're going to see the CBAN deployment expand both in terms of spectrum density and in terms of geography. You know, 350 has been kind of the baseline expectation for fixed world access ads in the current CBAN deployment. Would you be willing to put a stake in the ground?
Tony Skiadas: You know, where could that go? Could that, could that double by the time we get the full CBAN deployment out there by the end of next year? That's the first question. And I guess the second question.
Tony Skiadas: Tony, you gave us the kind of moving parts that EBITDA growth two percent. That's about three quarters of a billion after tax interest expense 17 and a half cents. That's about three billion, three quarters of a billion after tax one and a billion capex savings. So the big moving part that none of us really know is the cash tax and how that might impact free cash flow, whether free cash flow could be up a little bit down a little bit. Could you be more transparent around around that moving part?
David Barden: Thank you. Thank you very much. Thank you, David. When it comes to fixed world taxes, yeah, when we got to see, when the initial Shanko spectrum of God was in urban places, now since the end of the third quarter, we got the suburban and rural areas, but to continue at the end of the year to strengthen our urban area. So now that we're sort of deploying much more in the suburban and rural, that creates a new opportunity for us, both from our strength in wireless in many of those markets together with our fixed world taxes.
David Barden: But I've said it many times before, for us it's very important to have a certain volume and a certain cadence because we can optimize our resources, our capital, etc. So Tony and I feel really good about being around 400,000 net ads for broadband in total, including FIOS. That that has sort of been a mantra, they can be of course coming up and down a little bit, but it's not like we are forcing a lot of capital and resources in and in court and then doing election act.
David Barden: That's not efficient in a company like ours. We're a very financial discipline, as you know, and that's best for our customers and for our stakeholders like shareholders. So that's what you want to expect from us. And Dave, just on your question on cash taxes, so we said, you know, we're going to be pressured by the phase out of bonus. You know, we did see a tax benefit in 2023 from the spectrum clearing payments, and if you think about the head, when we see it at about $2 billion right now, and we'll have to see how things play out with what the proposed legislation is. Perfect. Hopefully guys, thank you so much. Yeah, thanks Dave. Brow away from the next question.
Craig Moffett: The next question comes from Craig Moffat of Moffat, Nathanson. Your line is there open. Yes, hi.
Hans Vestberg: I wonder if you can talk about your market growth expectations for post paid coming into the year. I know we you're the first one to report, so we haven't seen the results from anyone else yet, but what's your sense of what we can expect in terms of total post paid and maybe total phone growth for 2024 marketwide? Thank you, Greg.
Hans Vestberg: If I think about this year, I mean, first of all, what mobility in broadband is two of the most important infrastructure in the country. And I don't think any one company person or organization can live without those services. We are the number one in basic, everything we're doing.
Hans Vestberg: I think it's a healthy industry. It's an important, important product we have. Then it can come up and down.
Hans Vestberg: So I cannot give you a percentage what's going to happen. I think our offering is great. I think the product is so important, both mobility and broadband for all part of our society. I wouldn't like to be in any other business and it's sort of a so important for society that mobility and broadband is working.
Hans Vestberg: Can I just maybe drill down a little bit now? I mean, the growth numbers we've seen have been as high as 6 million plots. Is that a feasible growth rate population growth, including immigration, is more like 3 million? Is your sense as you go in to set your own expectations for the year that we'll see some deceleration? Or is your sense that there's still something going on that's keeping growth so far in excess of population growth?
Hans Vestberg: I think that we're going to, whatever number is going to be, we're going to get our fair share of it and that's what we are aiming for. But you're right, of course, immigration is lower, so the pool is smaller, but we've also seen a really good uptake between value segment to post paid. So it's a lot of factors coming in and then of course what we have done. I think about offerings where my plan, we're adding the perks, for example, Netflix and Max, we are expanding also or because we have such a great offering to our customers.
Unknown Executive: So this is a new time, but again, the product is so important for the market and for each and everyone else. So I feel really good about coming into this year, what we have done and where we go. And let's see where we end up. Thank you. Thanks Craig. Brad, we're ready for the next question.
Kannan Venkateshwar: The next question comes from Kannan Venkateshwar from Barclays. Your line is open sir.
Hans Vestberg: Thank you. So maybe a couple of, I guess, firstly on the fiber side, Hans, as you think about the base of fixed wireless subscribers, by next year you'll have a pretty big critical mass overall, you know, 5 million plus potentially. And it's not too far away from there, your bios basis, and you have the money coming in potentially, you know, there's more interest from private equity funds and so on and so forth.
Hans Vestberg: And I know you've talked about being a lot more disciplined on fiber, but does your break even threshold change just given the kind of critical mass you get to and fixed wireless and also the kind of capital alternatives that you're starting to see in the market. That's one.
Hans Vestberg: And secondly on the wireless side, you know, over the last two or three years, I mean, obviously there's been a pretty big deal when the service revenue from prices and explicit price increases. So you're also, you know, how long that can continue and when does mix take over and become a bigger component overall from a service revenue course perspective and how we should expect that transition to happen would be helpful. Thanks.
Hans Vestberg: Thank you, Kanan. I have to go back a little bit when it comes to a broad by strategy where the multipurpose network will build the networks once and we have multiple options at the edge. That was sort of the infancy of the horizon until it in edge network from the data center to the edge. We have harmonized everything.
Hans Vestberg: We have fiber in between everything. We have multi routers. We have one transport network. That is super important. It's sort of the brain of the network.
Hans Vestberg: Then at the edge, we have optionality. What type of access we have in the in the in the eye, like, of course, we go to continue with our success in files and outside we're doing fixed wireless access, but it gave us optionality over time. You know, I like owner's economics. I think that that makes us a very competitive and pricing and offerings to our customers. There are of course a lot of offerings from people that want to ship in capital, but ultimately it has paid off for us to be very, very prudent and financially disciplined with our own money. But you know, you can never out rule, but that's really my view on it.
Hans Vestberg: But I'm creating optionality with an network and Joe and his team are super agile if we need to be within that. On the wireless, I would say, I mean, if you look at our business side, they have great offerings in the market. They are taking the fair share of the 10 quarters and then have also made new offerings so they can expand. So I think they both have done continuity and value, and Wilde, of course, on the consumers side.
Hans Vestberg: They have historically had more ARPA increase with new offerings, new pricing, new products, rather than volumes, but you have seen us performing in the last part of the year. And I think Sampan and his team, they have said that they want to increase the part of getting new customers, but again, it will be financial discipline, and we should get the right customers. And if you look at our quality of our consumer base, it's just amazing. And we will continue to be financially prudent on that. But clearly, we want to have more volumes, but not to any cost.
Unknown Executive: We will do it with the right cost and the right product of our customers. Great. Thanks. Thanks, Kanan. Hey, Brower Ray for the next question.
Peter Supino: The next question comes from Peter Supino of Wolf Research. Sir, please go ahead with your question. Hi, thanks. Good morning.
Hans Vestberg: On the subject of consumption and network utilization, I wondered if you could update us on the number of gigabytes per month that post paid phone customers are consuming nowadays. And extending that thought over the next few years, does that growth and the robust FWA business that you're building suggests that we should prepare for densification or other radio access network or spectrum costs for capacity over the next several years, certainly not a 2024 question. Thanks.
Hans Vestberg: Yeah, I'll go back to how we build the network because the building the network is so important because the biggest challenge with a lot of efficacious, of course, transporting it in efficient way, having your own fiber. And that's where we've already built. When it comes to the growth in the network, yeah, everybody's using the network more. It's no different. We didn't fix while it's actually some files.
Hans Vestberg: And of course, wireless consumers are using the network more as well. But we have built a very stable network all the way from the data centers to the edge. And then, of course, we have assets that nobody else has. We have a lot of our traffic on millimeter way, which is the cheapest way to deliver data in the market by four.
Unknown Executive: And we have our C-bandures coming out. So, and we have our best engineers. So, I feel really good with that people and customers are using our network more. That's what it was intended for. And we have designed it like that. Great. Thanks, Peter. Hey, Brad, we're ready for next question.
Brian Kraft: The next question comes from Brian Kraft of Deutsche Bank. Your line is open, sir. Hi, good morning.
Hans Vestberg: I had to if I could. First, following up on John's earlier question, could you give us a sense for how much of the year-over-year improvement in growth ads in the fourth quarter was the result of healthy industry volumes versus the improved execution and product that you've gotten the market now. And additionally on that, did you see stronger performance in December versus the rest of the quarter? I asked because I think your last public presentation was in early December, and your results seemed even more positive than your tone back then.
Hans Vestberg: So, it seems like maybe you picked up momentum as a quarter progressed. And then I just had a separate question on the issue of of lead cables. I was wondering if you would comment on the latest media report that the EPA has conducted its own testing near some of your lead sheet cables that have shown lead levels above the EPA standard for safety. Any sense for whether these reports are accurate, and if so, how you're thinking about the potential impact at this point around this issue. Thank you.
Hans Vestberg: Yeah, thank you, Brian. Let me start with the market in the fourth quarter. We don't know. I mean, the others haven't reported.
Hans Vestberg: We only know that we have performed really well. But that has been, it's not the one quarter phenomena. If you think about from the second quarter, third quarter, even in the first quarter, we were sequentially improving all the time, and we have done that in a very disciplined way with a lot of actions, and that we need to keep up. So, and then the comment on how the quarter shaped, so you probably talk about consumer money and anything else. I think we're solid through the quarter. There was nothing sort of different during the month in the quarter.
Hans Vestberg: We were solid through the quarter doing well performance. On the lead, as I said before, we take that very seriously. I cannot comment what media media doing. We work with all the agencies to see that we're following this up, and we have we have revealed all the information we have. We don't have any more. We have also disclosed how much lab cable we have in the network, which is very little. But again, we take it seriously and work with all the agents.
Unknown Executive: Francis. Okay, thank you. Yeah, thanks, Bryan. Hey, Brad, we have time for one more question.
Walter Piecyk: Your last question will come from Walter Piecyk of Lightshed. Your line is open, sir.
Hans Vestberg: Thanks. Hey, Hans, this is, I apologize probably the fourth time you're coming back to the gross ad question, but I think earlier you made mention of kind of a change in structure from nationalization to localization. I think that was something that Sampath has had kind of stated as one of the specific things, and probably something that maybe could be more sustainable than just a change in a rate plan that obviously could be replicated or just addresses the market. So just a couple questions on that.
Hans Vestberg: First, if you think about kind of the ramp in fourth quarter, I know this is kind of a small question, but like the impact of localization and that change in the structure of the failed organization versus my plan, which had the large change in the structure of the failed organization. And then I guess more importantly, you know, this is sustainability, meaning that yeah, we typically do see, you know, sequential growth seasonally, but around this time of year, obviously more pronounced this year than past, but are we going to see even more sequential growth or, you know, more abnormal growth in the first half of the year as some of the implementation of that localization continues, or if we largely already seen that impact as as we go into 2024. Thank you. Hey, well, I think that was a good question.
Hans Vestberg: So the whole we started, remember, we started with the network as the sea ban is sort of rolling out in different zip codes all the time. We are engaged in locally, the same with did with the consumer group to be much more local, to be able to local marketing cater for the local market, have local flavors of our marketing. We worked with sports league like NFL and the teams in different markets to see that happen.
Tony Skiadas: So of course, I'm going to attribute a part of our growth during the year to the decentralization, but we just got started to see that we have that team in place and and and San Pat and the team of working with them with this market president to make it, but it's also a sign of where the market is going. You need to be local and you need to be on the ground in in the different societies in order to perform and being knowledge and Verizon is most visibly known as grounds and now we're taking next step with our structure.
Tony Skiadas: So very pleased what I've seen so far, but more to be done. Yeah, well, to stand on to what to what Hans said, you know, the regional structure is a lot closer to the customer and we've run the businesses way for many, many years and we can do things like different promos for different markets and, you know, local resources and decision making and the localization offsets some of the price ups as well.
Tony Skiadas: So, you know, we feel really good about where we're heading, especially with the tier two and tier three roll outs with sea band and the opportunity that provides. Tony, can you also remind us when the board considers Sherry purchased as it relates to leverage and I think the leverage that you mentioned earlier in the call excludes the unsecured debt because you were referencing a two six number. So, assuming we're basing it off the two six number, I think your long term target was 2.0.
Tony Skiadas: So clearly, you wouldn't let it go below two zero before you start buying stock back. But is there a consideration under two five where the board starts to consider Sherry purchase? Thank you. Thank you all. I think this is something that we're very disciplined or capital location products clear. Number one, money to the business, basic archapex. Number two, continue to put the board in the place so they can continue to increase our dividend and number three, paying down debt.
Tony Skiadas: When we come down to two 25, we have said we will start considering buybacks but our ultimate long term goal is to get around two. So, yeah, that's the plan but of course it will play in where the market is, where the interest rates are, where the capital is and where equity is. But clearly, that's the plan we have right now and the board is fully tuned to that plan.
Hans Vestberg: Thank you. Yes, thanks, Walt. Brad, back to you. Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation and for using Verizon Conference Services. You may now discount. [inaudible]
[noise] good morning, and welcome to the Verizon <unk> fourth quarter 2023 earnings Conference call. At this time, all participants have been placed in a listen only mode and the floor will be opened for questions. Following the presentation.
To ask a question press star one on your Touchtone phone.
If at any point. Your question has been answered you may remove yourself by pressing star two.
Today's conference is being recorded.
If you have any objections you may disconnect at this time.
It is now my pleasure to turn the call over to your host Mr. Brady Connor Senior Vice President Investor Relations.
Thanks, Brad Good morning, everyone and welcome to our fourth quarter earnings Conference call I'm, Brady Connor and I'm joined by our Chairman and Chief Executive Officer, Hans Vestberg as well as our Chief Financial Officer, Tony Ski Addis.
George Brady Connor: Before we begin I'd like to draw your attention to our safe Harbor statement, which can be found on slide two of the presentation.
Brady Connor: Formation in this presentation contains statements about expected future events and financial results that are forward looking and subject to risks and uncertainties.
Brady Connor: Discussion of factors that may affect future results is contained in verizon's filings with the SEC, which are available on our website.
Brady Connor: This presentation contains certain non-GAAP financial measures.
Brady Connor: Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website.
Brady Connor: Earlier. This morning, we posted to our Investor Relations website, a detailed review of our fourth quarter and full year results, you'll find additional details in the earnings materials on our Investor Relations website.
Brady Connor: We'd like to note that verizons fourth quarter reporting earnings per share were negatively impacted by a number of special items, which are discussed in the written remarks available on our Investor Relations website.
Brady Connor: The largest the impacts was also disclosed in our 8-K filing last Wednesday.
Excluding these special items adjusted EPS for the fourth quarter was $1.08 with that I'll turn the call over to Hans.
Speaker Change: Thank you.
Hans Vestberg: Morning, everyone and welcome to our fourth quarter 'twenty to 'twenty three earnings call I Hope you all had a great start till 'twenty to 'twenty four I'm pleased to report that Verizon closed out the year with a strong fourth quarter, finishing off a year of solid operation and financial performance for US 20 to 23.
Hans Vestberg: It was a year of continuous improvement and important actions across the business. We made significant changes to how we operate and to our team and those changes paid off we stabilize our core business and position the company for renewed growth and profitability.
Hans Vestberg: We've been strong momentum quarter after quarter, culminating in a very good holiday season, and find any we met the guidance that we provided to you in each of our key performance indicators entering 'twenty four but rigel stands ready to further unlock our performance potential at an accelerating rate.
Hans Vestberg: We now have all the assets the best team in the business and are focused on continued operational excellence to deliver even better results going forward, let me share some full year highlights with you.
Hans Vestberg: Wireless service revenue for 'twenty to 'twenty, three was $76 $7 billion, 832% year over year increase we delivered outstanding volumes during a healthy fourth quarter, where our customers clearly embraced our offerings full year adjusted EBITDA was 47.
Hans Vestberg: $8 billion contributing to a very strong free cash flow of 18 $7 billion, reflecting our disciplined and strategic approach to profitable growth.
Hans Vestberg: Herself or financial strength, we raised our dividend for the 17th year in a row with a healthy free cash flow dividend payout ratio or the broke similarly, 59%. We also reduced our year over year leverage while continuing to bring capex back towards pieces as usual levels. These are lines would have kept it out.
Hans Vestberg: Acacia priorities, we have shared in recent years.
Hans Vestberg: These results provide a solid foundation, where Verizon journey in future success and I'm pleased that we've put the leadership and team in place last year that would serve variety of all stakeholders well in both the short and long term, we as a team have focused on capturing the market opportunity and I'm proud of our progress in 'twenty.
Hans Vestberg: Just two weeks ago, Leslie Berland joined Verizon as a chief marketing officer I'm excited to bring her on board and have a great confidence in her ability continue shaping verizon's premium brand perception and story.
Hans Vestberg: He started twins when three determine to differentiate ourselves by investing even more in profitable growth, while transforming Verizon to make the company more efficient and effective seeing the continued strength of the U S consumer B C. A holiday store traffic and rising demand for mobility broad.
Hans Vestberg: Then in private networks. We also took actions to fuel growth during the fourth quarter and it showed in our results.
Hans Vestberg: That milestone in 'twenty to 'twenty three was our launch of my plan, which was designed from extensive customer research to be the most flexible plan available to U S consumers from any wireless company.
Hans Vestberg: My plan has been a great success that ive seen stellar adoption introduced in May we're already to have 13.1 million my plan subscribers and these customers using premium packages and our unique perks driving ARPA.
Hans Vestberg: All the changes we've made in 'twenty three include establishing a reader distribution model tailing. Our approach. So every market revamping sales composition to support productivity and introducing new price plans and promotions in consumer and business. There is obesity or the partner with H L. Pic.
Hans Vestberg: To be more efficient to deliver post sale implementation and customer support for managed network services enhancing our customer service, while saving Verizon money. These actions paired with all of our assets sets us up very well for 'twenty one before we're not working from an effective model and this is just the start.
Overall, the wireless industry is strong as we head into 'twenty 'twenty four and we are confident in our strategy.
Hans Vestberg: We have great offerings with Optionality to meet the needs of customers of antibody. It on the best network in the country.
Hans Vestberg: Now, let me share a bit more how each alert service performed in the fourth quarter.
Starting with mobility, where.
449000, postpaid phone net adds driven by improving net ads in consumer and a continued sustained performance in Verizon business, our discipline and segmented market approach is working with customers and creating great economics for our shareholders.
Hans Vestberg: In consumer you can see the pattern of continuous improvements from the start of the year in the fourth quarter, we delivered our best postpaid phone gross adds performance since 2019, and our best net adds in two years, we added 318000 postpaid phone customers in the fourth quarter.
Gross adds were up almost 17% year over year. It is clear that we have momentum in consumer as we move into 'twenty 'twenty four and we'll continue to work to get their fair share of new business.
Hans Vestberg: Our customer centric golfers or resonating in the market and we're just getting started but leveraging variety shows large subscriber base and she partnership we can deliver exclusive discounts offered like Netflix and Max for just $10 a month underscoring our industry leadership and value driven.
Hans Vestberg: And content offerings.
With our vast network coverage and the largest base of loyal customers. We're uniquely positioned to provide targeted high value deals that deeper relationship across connected devices streaming and more.
Hans Vestberg: Within the value business, which includes our prepaid offerings like tracfone visible and totaled over I saw them, we still have work to do but they're making progress.
Hans Vestberg: Moving to a variety of some business that team continued to deliver on mobility with total postpaid phone net adds of 131000 for the fourth quarter 'twenty to 'twenty, three marking our 10th consecutive quarter of postpaid phone net adds above 125000 for the full year.
Hans Vestberg: <unk> added 506000 phone net adds and outstanding result, our busiest customers are prioritizing mobility and value the optionality woolford with highly tailored plans on the best network in the country.
Hans Vestberg: Now, let's turn to broadband for the year, we had more than one 7 million broadband net adds with more than one and a half million net adds from fixed wireless access and 248000 net adds from fires a nice increase over 'twenty to 'twenty two.
Hans Vestberg: Why its axis, we're consistently adding more than 350000 subscribers per quarter, which is part of our plan for steady sustainable growth that exceeds what we expected at launch.
Hans Vestberg: Just three years after launch we serve more than 3 million fixed wireless access customers well ahead of our stated goal of four to 5 million subscribers by the end of 'twenty to 'twenty five.
Hans Vestberg: With fixed wireless access, we're expanding into new markets and proving the value over iphones connectivity.
Hans Vestberg: Customers are finding strong reliability and speed in fixed wireless access and that shows in our results, including a very strong net promoter score for product that still is in the beginning the pace of adoption has the team Super excited we expect this will be a long term source of recurring revenue.
Hans Vestberg: For Verizon and we're ramping this year with a strong base for continued growth.
Hans Vestberg: Turning to the private networks and our five E business solutions, we continue to see interest from large enterprises running complex logistics and operations like ports automotive and heavy industries in November Norfolk International terminal contracted us to build a second private to fight the network for them.
Hans Vestberg: They already one of our partners in Smart car development has contracted also build a private network for their automotive take testing environment, New core one of the country's largest steel companies has us building private networks for three of its sites with more to come over the next year.
Hans Vestberg: We're building a new source of revenue expansion, where we are the clear leader last year. We're also expanding existing five your private networks partnerships with Nf L to bring new spectator and retail experience to fans everywhere when we build relationships with these large M D.
Hans Vestberg: Prices and they see what our network can do for them. There is always potential for more business and our network is just getting better and better every day.
Hans Vestberg: With full access to our spectrum as of the end of third quarter last year. Our mission is to optimize the experience in every market and expand into suburban or rural markets, where we know our consumer and business customers are eager to take up our offerings.
Hans Vestberg: We have been expanding and improving our network in key markets through 2020 three and into this year I would have said it before and I would say it again our network is the foundation of how we offer the best value and premium experience to our customers and we're now seeing our investment in C band paying off in terms of customer experience.
Hans Vestberg: Well, we have C band, we see a higher gross adds lower churn and more step ups to premium services will also see increased uptake of customers, taking both mobility and broadband services. Meanwhile, millimeter wave, which we have now deployed in many urban areas and all therapies.
Hans Vestberg: F L stadiums sets Verizon apart with an outstanding performance at high density areas and public events spaces and for a 32nd consecutive time Verizon was the most awarded company in the country for wireless network quality with a first place rankings in each of J D power.
Hans Vestberg: Six regions.
We are the network that America relies on and we take that commitment very seriously looking ahead, our priorities about 24 are crystal clear.
Hans Vestberg: We remain laser focused on growing wireless service revenue.
Hans Vestberg: Expanding our adjusted EBITDA and free cash flow to allow for a meaningful depth reduction in the year ahead. This is what our whole team is working towards and what you are shareholders and our board want us to focus on Tony will have more details for you, but we anticipate strong wireless service revenue growth.
Hans Vestberg: 2% to 3.5% in 'twenty, 'twenty, four which reflects our ability to sustain the top line or a business as we continue to pursue the right balance of profitability and customer growth.
Hans Vestberg: Our adjusted it beat the profile will continue to improve as we become even more efficient with growth cost saving measures and our disciplined promotional spending our capital allocation priorities remain consistent and as we lower our capital intensity from the C band build out.
Hans Vestberg: And our new business structure, we expect to see continued strong free cash flow generation going forward.
Hans Vestberg: That will enable our board to continue to raise our dividend and also enable us to bring down leverage now Tony will discuss the quarter as well as our operations and guidance in more detail.
Tony: Thanks, Hans and good morning.
Tony: Executing on our plan, we finished the year strong and delivered on our financial guidance.
Tony: We exited the year with good momentum and remain committed to our three priorities of growing wireless service revenue adjusted EBITDA and free cash flow.
In 2023, we set out to improve our operational performance, while sustaining financial discipline, our fourth quarter and full year results confirm that our strategy is working and that we can deliver strong financials and improve key operating metrics.
Tony: Sumer postpaid phone net adds totaled 318000 for the quarter, a substantial improvement of 369000 sequentially and 277000 compared to the prior year.
Tony: Our consumer postpaid phone churn of zero down eight 8% represents a stable result, even after we implemented over $1 billion of annualized pricing actions in 2023.
Tony: While we do not provide specific guidance on volumes, we wanted to share a couple of items as we look into 2024.
Tony: In the first quarter, we are taking additional targeted pricing actions that we expect will result in incremental pressure on consumer postpaid phone churn in the period.
Tony: However, we expect to deliver positive consumer postpaid phone net adds and full year 2024, as we execute on our strategy of growing our subscriber base, while being financially disciplined.
Tony: Postpaid phone gross adds in the quarter up nearly 17% year over year.
This represents our best quarterly consumer gross AD performance in four years.
Our attractive my plan offers combined with our segmented approach to the market regional sales structure and disciplined promotional strategy continued to deliver strong results.
Tony: Additionally, postpaid upgrades remain lower as compared to the prior year.
Tony: The consumer postpaid upgrade rate was four 4% in the fourth quarter down 120 basis points year over year as a result of approximately 19% fewer upgrades.
Speaker Change: John said, we continue to see better performance in markets, where we have deployed C band.
Speaker Change: And our first 76 C band markets fourth quarter consumer postpaid phone gross add growth was eight percentage points better than a Nazi band markets. Additionally.
Speaker Change: Additionally, consumer postpaid phone churn in C band markets was four basis points better than in Nazi bad markets.
Speaker Change: Strong momentum in the quarter combined with the continued deployment of our C band network positions us well in 2024.
Speaker Change: Quality of the business, we are writing consumer remains high as my plant continues to drive premium plan adoption.
Speaker Change: The premium take rate in C band markets for the quarter was more than 10 percentage points higher than a non C band markets.
Speaker Change: Consumer ARPA of $134.10 represents an increase of four 7% year over year.
Speaker Change: This was driven by new customer additions.
Speaker Change: Premium plan adoption and fixed wireless subscriber growth.
Speaker Change: We expect continued and healthy organic ARPA growth in 2024.
Speaker Change: Our prepaid results remained challenged in the fourth quarter. This is in part to seasonally weaker national retail sales volumes, which is the primary sales channel for Tracfone brands.
Speaker Change: We also continue to see pricing pressures from low end postpaid offerings.
Speaker Change: Prepaid net losses for the quarter were 289000.
Speaker Change: During the quarter, we saw continued strong growth within the visible in total by Verizon brands, which we will continue to scale.
Speaker Change: The team is also focused on our partnerships to improve the performance of the straight talk brand.
Speaker Change: We believe we're taking the right steps to better position our offerings in the market and expect to see some stabilization in 2024.
Speaker Change: Ryzen business delivered another strong quarter with 131000 phone net adds which as Hans mentioned is our 10th consecutive quarter above 125000.
Speaker Change: The business markets group had its best phone net add performance in the last two years, demonstrating how our value proposition is resonating with small and medium businesses.
Operator: Good morning, and welcome to the Verizon Fourth Quarter 2023 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and the floor will be opened for questions following the presentation. To ask a question, press Star 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself by pressing Star 2.
Speaker Change: Similar to consumer we are taking pricing actions in the first quarter in business that could result in elevated phone churn in the period How's.
Speaker Change: However, we are confident that we will continue to deliver strong business volumes in 2024.
Speaker Change: Moving onto broadband we delivered 413000 net additions in the quarter continuing the pace of over 400000 broadband net adds for the fifth consecutive quarter.
Operator: This conference is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to turn the call over to your host, Mr. Brady Connor, Senior Vice President, Investor Relations. Thanks, Brad. Good morning, everyone, and welcome to our fourth quarter earnings conference call. I'm Brady Connor, and I'm joined by our chairman and chief executive officer, Hans Vestberg, as well as our chief financial officer, Tony Skiatis. Before we begin, I'd like to draw your attention to our Safe Harbor Statement, which can be found on slide two of the presentation. The information in this presentation contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainty. Discussion of factors that may affect future results is contained in Verizon's filings with the FCC, which are available on 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.
Speaker Change: We see strong demand for both our fiber and fixed wireless offerings and we continue to see positive responses from customers regarding the quality and reliability of our services in fixed wireless we delivered 375000 net adds for the quarter growing the base to over 3 million subscribers.
Speaker Change: We launched C band at early 2022, and our fixed wireless access in the last two years reflects the strong demand for high quality broadband and the strength and reliability of our product.
Notably in the fourth quarter over 80% of our consumer fixed wireless gross adds came from C band markets.
The growth trajectory from fixed wireless continues to be robust and we are ahead of schedule to achieve our four to 5 million subscriber goal by year end 2025.
Speaker Change: <unk> Internet net adds were 55000 down 4000 year over year. We are pleased with the success of files with strong gross adds and retention, reflecting the quality and overall value of the product. We expect broadband subscriber momentum to extend into 2024 as we continued deployment of our C band spectrum further expand our.
George Brady Connor: Earlier this morning, we posted on our Investor Relations website a detailed review of our fourth quarter and full year results. You'll find additional details in the earnings materials on our Investor Relations website. We'd like to note that Verizon's fourth-quarter reporting earnings per share were negatively impacted by a number of special items, which are discussed in the written remarks available on our investor relations website. The largest of the impacts was also disclosed in our 8K filing last Wednesday. Excluding these special items, adjusted EPS for the fourth quarter was $1.08.
Speaker Change: Files footprint and bring new products and offers to the market.
Speaker Change: Let's now look at our financials consolidated.
Speaker Change: Consolidated revenue for the fourth quarter was $35 $1 billion down zero down 3% year over year.
Speaker Change: This change can be attributed to the wireless equipment revenue, which was approximately 2% lower than the prior year as total postpaid upgrades declined by approximately 18%.
Speaker Change: Total wireless service revenue was $19 $4 billion up three 2% year over year.
Hans Vestberg: With that, I'll turn the call over to Hans. Thank you, Brady. Good morning, everyone, and welcome to our fourth quarter 2023 earnings call. I hope you all had a great start to 2024. I'm pleased to report that Verizon closed out the year with a strong fourth quarter, finishing off a year of solid operations and financial performance. For us, 2023 was a year of continuous improvement and important actions across the business. We made significant changes to how we operate and to our team, and those changes paid off.
Speaker Change: Strong revenue benefited from targeted pricing actions more customers selecting premium unlimited plans and growth in fixed wireless access.
Speaker Change: This was partially offset by pressure from prepaid, which reduced total wireless service revenue growth by approximately 70 basis points year over year as well as promo amortization.
Speaker Change: Consolidated adjusted EBIT in the quarter was $11 7 billion, a decrease of zero down 6% compared to the prior year.
Speaker Change: Higher wireless service revenue and the benefits of lower upgrades were more than offset by higher marketing and bad debt expense and ongoing declines in business wireline revenue.
Hans Vestberg: We stabilized our core business and positioned the company for renewed growth and profitability. We built strong momentum quarter after quarter, culminating in a very good holiday season, and, finally, we met the guidance that we provided to you in each of our key performance indicators. Entering 2004, Verizon stands ready to further unlock its performance potential at an accelerating rate. We now have all the assets, the best team in the business, and a focus on continued operation and excellence to deliver even better results going forward. Let me share some full year highlights with you.
Speaker Change: Adjusted EBITDA margin of 33, 2% was relatively flat year over year.
Speaker Change: In 2023, we implement the transformations within our consumer customer care group as well as business managed services.
Speaker Change: We are pleased with what we have achieved this year and our cost saving measures are meeting our expectations. We expect further progress on our cost efficiency program in 2024 adjusted.
Speaker Change: Adjusted EPS was $1 eight in the quarter, resulting in full year adjusted EPS of $4.71.
Speaker Change: Turning to our cash flow summary, cash flow from operating activities for the fourth quarter was $8 $7 billion, bringing the total for 2023 to $37 $5 billion. This marks a year over year improvement of over $300 million, primarily due to working capital improvements.
Speaker Change: Capex for the quarter came in at $4 $6 billion compared to $7 3 billion in the prior year.
Speaker Change: The full year Capex totaled $18 8 billion, which represents a more than $4 billion reduction in capital spending from 2022, as we come down from our peak C band spending level.
Hans Vestberg: Wider service revenue for 2023 was $76.7 billion, a 3.2% year-over-year increase. We delivered outstanding volumes during a healthy fourth quarter, where our customers clearly embraced our offering. Full-year adjusted EBITDA was $47.8 billion, contributing to a very strong free cash flow of $18.7 billion, reflecting our disciplined and strategic approach to profitable growth. As a result of our financial strength, we raised our dividend for the 17th year in a row, with a healthy free cash flow dividend payout ratio of approximately 59%. We also reduced our year-over-year leverage while continuing to bring CAPEX back towards business-as-usual levels.
Speaker Change: Free cash flow for the fourth quarter was $4 $1 billion, bringing our year to date total to $18 $7 billion of $4 $7 billion increase over the prior year driven by operational improvements and the lower Capex spending that we previously noted we are pleased to have delivered on our guidance of more than $18 billion of free cash flow for the.
Speaker Change: Full year, which reflects a balanced and strategic approach to delivering profitable growth net unsecured debt at the end of the quarter was $126 $4 billion or $1 6 billion dollar improvement year over year net unsecured debt increased sequentially, primarily due to settling the $3 $7 billion in incentive payments to <unk>.
Speaker Change: Satellite operators for our remaining C band spectrum.
Our net unsecured debt to consolidated adjusted EBITDA ratio was two six times as of the end of the fourth quarter in line with the prior two quarters.
We expect deleveraging of the balance sheet to accelerate in 'twenty 'twenty four as Capex comes down to be a new levels and we continue to generate strong cash flow.
Speaker Change: Additionally, we continue to benefit from our approach to managing long term debt and have only $3 $6 billion of unsecured debt maturing in 2024.
Hans Vestberg: This aligns with the capital allocation priorities we have shared in recent years. These results provide a solid foundation for Verizon's journey and future success. And I'm pleased that we put a leadership team in place last year that will serve Verizon stakeholders well in both the short and long term. We as a team have focused on capturing the market opportunity, and I'm proud of our progress in 2023. Just two weeks ago, Leslie Burland joined Verizon as our Chief Marketing Officer.
Speaker Change: Overall, I'm pleased with our momentum exiting the year and our performance in 2023, delivering an improved operational profile. While also meeting our financial guidance now I want to take a few moments to look ahead and walk through our 2024 guidance, our 2024 guidance demonstrates our expectations for accelerating wireless service revenue growth.
Speaker Change: As a reminder, the reported 2023 wireless service revenue growth of 3.2% included approximately 190 basis points of benefit from a reallocation of other revenues.
Excluding this reallocation the 'twenty to 'twenty three wireless service revenue growth was one 3%.
Speaker Change: For 2024, we expect total wireless service revenue to grow between 2% and three 5%.
Hans Vestberg: I'm excited to bring her on board and have great confidence in her ability to continue shaping Verizon's premium brand perception and story. We started 2023 determined to differentiate ourselves by investing even more in profitable growth while transforming Verizon to make the company more efficient and effective. Seeing the continued strength of the U.S. consumer, busy holiday store traffic, and rising demand for mobility, broadband, and private networks, we also took actions to fuel growth during the fourth quarter, and it showed in our results. A standout milestone in 2023 was our launch of MyPlan, which was designed from extensive customer research to be the most flexible plan available to U.S. consumers from any wireless company. MyPlan has been a great success that has seen stellar adoption.
Speaker Change: This will be driven by anticipated positive postpaid phone net additions in both consumer and business.
Speaker Change: Continued fixed wireless access subscriber growth.
Speaker Change: Further adoption of premium unlimited plans growth in products and services and pricing action benefits.
Speaker Change: We expect consolidated adjusted EBITDA to grow by 1% to 3% versus the prior year.
Speaker Change: This outlook reflects expected higher wireless service revenue and the impact of our cost transformation initiatives, partially offset by continued pressure in business wireline revenues and increased wireless network operating expenses.
Speaker Change: Full year adjusted earnings per share is expected to be $4 50 to $4.70.
Speaker Change: As noted we expect adjusted EBITDA to grow in 2024 offset by certain below the line impacts.
Speaker Change: Specifically higher interest expense is expected to impact adjusted EPS by 16 to 19 cents over 75% of which is driven by the continued reduction in capitalized interest related to the C band licenses being placed into service.
Speaker Change: In addition, EPS is expected to be impacted by approximately seven to nine cents of higher pension and <unk> expense, primarily due to the expiration of certain credits.
Speaker Change: This impact will flow through the other income and expense line on our income statement.
Speaker Change: We expect depreciation and amortization to be relatively flat in 2024 compared to 2023.
Hans Vestberg: Introduced in May, we're ordered to have 13.1 million MyPlan subscribers, and these customers are choosing premium packages and our unique perks driving ARPA. Other changes we made in 2023 include establishing a regional distribution model, tailoring our approach to every market, revamping sales composition to support productivity, and introducing new price plans and promotions for consumers and businesses. Verizon Business also partnered with HL Tech to be more efficient to deliver post-sale implementation and customer support for managed network services, enhancing our customer service while saving Verizon money.
Speaker Change: Our adjusted effective income tax rate is expected to be in the range of 22.5% to 24% based on current legislation.
Speaker Change: As discussed in prior quarters capital spending for the full year is expected to be between 17 and $17 $5 billion down from $18 $8 billion in 2023.
Speaker Change: While we are not providing guidance on 2024 of free cash flow. We wanted to provide some additional color to aid with your analysis.
Speaker Change: <unk> to free cash flow will come from our adjusted EBITDA growth outlook as well as the expected $1 5 billion dollar reduction in Capex in 2024 based on the midpoint of our guided Capex range.
Speaker Change: Offsets will be higher interest expense and higher cash taxes.
Speaker Change: As a reminder, the majority of the higher interest expense relates to reductions in capitalized interest.
Speaker Change: Such interests was recognized in cash flow from investing prior to placing the C band spectrum into service.
Speaker Change: The higher cash taxes are primarily related to the continued phaseout of bonus depreciation in 2024 based on current legislation.
Speaker Change: Overall, we expect a strong free cash flow profile that will support our capital allocation priorities and position us for meaningful unsecured debt reduction in 'twenty 'twenty, four which we expect to come in the latter half of the year.
Hans Vestberg: These actions, paired with all of our assets, set us up very well for 2024. We are now working from an effective model, and this is just the start. Overall, the wireless industry is strong as we head into 2024, and we are confident in our strategy. We have great offerings with optionality to meet the needs of customers of any budget on the best network in the country. Now, let me share a bit more about each of our services' performance in the fourth quarter. Starting with mobility, we had 449,000 post-paid phone NetDads, driven by improving NetDads in consumer and a continued sustainable performance in Verizon business. Our disciplined and segmented market approach is working with customers and creating great economics for our shareholders. In consumer, you can see the pattern of continuous improvements since the start of the year. In the fourth quarter, we delivered our best postpaid phone gross ads performance since 2019 and our best net ads in two years. We added 318,000 postpaid phone customers in the fourth quarter, and our gross ads were up almost 17% year over year.
Speaker Change: With that I will now turn the call back over to Hans for his closing thoughts.
Hans Vestberg: Thank you Tony as you've heard today, we're confident and well positioned to deliver a solid 'twenty to 'twenty four.
Hans Vestberg: Thanks to our best in class network, which is only getting better we're offering mobile and broadband services that customers value and need the most our industry is critical to the next wave of innovation and Verizon is ready to capitalize on the opportunities of the AI economy to bring this technology to life for all our stakeholders.
Hans Vestberg: I said in the beginning we have the right team in place to execute the next chapter in <unk> history I'm proud of the work our team accomplished in 2023 and I'm excited about we will deliver in 2024.
Hans Vestberg: All result in C band market speaks for themselves and support our investment decisions and we're going to lean even further as we expand into suburban or rural markets, while maintaining the financial discipline you come to expect from US. We will continue to stay very close to our customers to understand their needs and preferences. So that.
Hans Vestberg: We can offer the right promotions at the right times in the right markets.
Hans Vestberg: We have the right people the right assets and the right strategy our focus for 'twenty. One before he is on execution is a winning combination and we are very confident heading into this year. Finally, I want to remind you that we are hosting an investor event on February 5th and encourage everyone to tuning.
Hans Vestberg: Through the webcast given the financial update today next month will be more of an operational and strategic update on the company.
We're ready to take questions.
Speaker Change: Thanks, Hans Brad we're ready for the first question.
Thank you we will now begin the question and answer session.
Speaker Change: If you would like to ask a question. Please press star one please on mute your phone and record your name clearly when prompted your name is required to introduce your question too.
Hans Vestberg: It is clear that we have momentum in consumers as we move into 2024, and we will continue to work to get our fair share of new business. Our customer-centric offers are resonating in the market, and we're just getting started. By leveraging Verizon's large subscriber base and key partnership, we can deliver exclusive discount offers like Netflix and Max for just $10 a month, underscoring our industry leadership in value-driven content offerings.
Speaker Change: To withdraw your request please press star two.
One moment for the first question.
Speaker Change: The first question will come from John Hodulik of UBS. Your line is open Sir.
John C. Hodulik: Great. Thanks, Good morning, guys.
John C. Hodulik: I'd love to drill down on that a couple of things firstly.
John C. Hodulik: Sub trends 17.
John C. Hodulik: 17% growth is some real momentum.
John C. Hodulik: How did you talked to you about a number of sort of potential drivers, but if theres anything you could.
John C. Hodulik: So the specific sort of talk about what drove that in the quarter and is that likely to continue also in the account growth is that likely to continue.
John C. Hodulik: And then you talked about some churn on the price increase anything you can say about sort of the net add momentum as you look into 'twenty four.
Hans Vestberg: With our vast network coverage and the largest base of loyal customers, we're uniquely positioned to provide targeted, high-value deals that deepen relationships across connected devices, streaming, and more. Within the value business, which includes our prepaid offerings like Tracfone, Visible, and Total Blue Verizon, we still have work to do, but we are making progress. Moving to Verizon Business, the team continued to deliver on mobility with total postpaid phone net ads of 131,000 for the fourth quarter of 2023, marking our 10th consecutive quarter of postpaid phone net ads above 125,000. For the full year, business added 562,000 phone net ads, an outstanding result. Our business customers are prioritizing mobility and value the optionality we offer with highly tailored plans on the best network in the country. Now, let's turn to broadband.
Speaker Change: First one maybe for Tony.
Speaker Change: Nice.
Speaker Change: <unk> revenue growth any additional info you can give us to sort of unpack that in terms of the price increase impact versus last year.
Speaker Change: And what you're seeing in terms of the theory that'd be great. Thanks.
Speaker Change: John Thank you for the question. So let me talk about the subs done them in.
Speaker Change: On the business side, our 10th quarter in a row more than 125000 of the kind of the team is doing a great job.
Speaker Change: Our network is performing so well so our customers use to continue to buy in with us not only that our offerings and our go to market is he is as strong as ever. So we feel really good that both with Kyle and the team is doing on the consumer side, Yeah. We've had a good.
Speaker Change: Fourth quarter, but you have seen also the all through the year that we have sequentially improved all the time everything started where we started with a new offering my plan, which resonates with the market very much consumer insights and it's not on top of that or Sam but has done a lot of changes in our structure all the way from.
Speaker Change: The go to market the incentives in our stores.
Speaker Change: I know that the centralization of it so.
Speaker Change: It hangs together all away. So I think the most important we have the right offerings in the market and that has really resonated on the consumer side. So.
Speaker Change: So I'm really happy with the team we will continue to execute on the plan, where I am and we are started.
Speaker Change: Hey, John its Tony Good morning, So just to add onto what Hans mentioned, we did really well in tier one markets as we mentioned in the prepared remarks about eight percentage points better than we were also net add positive in both tier two and tier three markets as well you know, we improved our competitive positioning against all providers.
Hans Vestberg: For the year, we had more than 1.7 million broadband NetDads, with more than 1.5 million NetDads from Fixed Wireless Access and 248,000 NetDads from Fios, a nice increase over 2022. On Fixed Wireless Access, we're consistently adding more than 350,000 subscribers per quarter, which is part of our plan for steady, sustainable growth that exceeds what we expected at launch. Just three years after the launch, we serve more than 3 million Fixed Wire Access customers, well ahead of our stated goal of 4 to 5 million subscribers by the end of 2025. With Fixed Wire Access, we're expanding into new markets and proving the value of Verizon's connectivity. Customers are finding strong reliability and speed in fixed wire access, and that shows in our results, including a very strong net promoter score.
Tony: We continue to build out C band as we said earlier and in suburban and rural markets and we see further opportunity there and as Hans mentioned, we had strong momentum in the D. B G side as well on both mobility and FWS. So good results and then on your question on the on service revenue. So.
Tony: So we feel really good about the shape of service revenue in 2020 for the guidance that we gave of 2% to 3.5% reflects accelerated growth and we talked about the jump off point of one 3% in the prepared remarks.
Tony: The midpoint of our guidance range implies over $2 billion of service revenue growth. If we think about the the assumptions in the guide in terms of tailwind as you know we've executed a number of pricing actions.
Tony: Both in the back half of 2023 that do carry into 2024 as well as in recent weeks. We've taken further pricing actions in both consumer and business that'll provide a tailwind. We also have an improving volume profile in our consumer business as we said in the prepared remarks, we expect to have positive phone net adds in consumer and <unk>.
Hans Vestberg: For a product that is still in the beginning, the pace of adoption has the team super excited. We expect this will be a long-term source of recurring revenue for Verizon, and we're entering this year with a strong base for continued growth. Turning to private networks and our 5G business solutions, we continue to see interest from large enterprises running complex logistics and operations like ports, automotive, and heavy industries. In November, Norfolk International Terminal contracted us to build a second private 5G network for them. Audi, already one of our partners in smart car development, has contracted us to build a private network for their automotive tech testing environment.
Tony: 'twenty 'twenty, four and stable business volumes as well and then the third tailwind I'd point to is an increasing contribution from fixed wireless access we have really good momentum and over 3 million subs in the base in terms of headwinds prepaid.
Tony: It has been a drag on service revenue both in the fourth quarter and the full year was about $142 million in the fourth quarter and we expect the prepaid headwinds to continue into 2024 as we stabilize that business and then I'm promo amortization that continues to be a headwind with the increase in 2024 similar to the increase we experienced in 2023.
Tony: But when you put that altogether, we like the trajectory of service revenue.
Speaker Change: That's great. Thanks, guys.
Speaker Change: Yeah, Brad we're ready for the next question.
Speaker Change: The next question comes from Simon Flannery of Morgan Stanley. Your line is open.
Simon Flannery: Great. Thank you very much good morning, just following up there on the fixed wireless could you just give us a little bit of color around.
Simon Flannery: The churn is performing what are you seeing in terms of those cohorts that have had the service for some time and any comments on sort of capacity and so forth and also are you seeing emerging seasonality in this product driven by strong back to school in Q3, and then maybe a little bit softer than in Q4, and then any anything you can.
Hans Vestberg: And Nucor, one of the country's largest steel companies, has us building private networks for three of its sites, with more to come over the next year. Strategically, we're building a new source of revenue expansion where we are the clear leader. Last year, we also expanded existing 5G private network partnerships with the NFL to bring new spectator and retail experiences to fans everywhere. When we build relationships with these large enterprises, and they see what our network can do for them, there's always potential for more business, and our network is just getting better and better every day. With full access to our spectrum as of the end of the third quarter last year, our mission is to optimize the experience in every market and expand into suburban and rural markets where we know our consumer and business customers are eager to take up our offering. We have been expanding and improving our network in key markets through 2023 and into this year. I have said it before, and I will say it again.
Simon Flannery: Color you can provide on your exposure to ACP and.
Simon Flannery: How that may affect you and your latest thoughts on the beat program. Thank you.
Speaker Change: Okay. Thank you all the fixed wireless access I think the product is as much ordering wound up past 3 million subs. Both on the PC side, and then consumer together clearly are the the rollout and the product is is unique it is the rest of the night show good in the market the simplicity.
Product done and installing it which was the which was our idea and even if we took out the discount that we had a in the third quarter, we havent seen any slowdown in the product is resonating. So well we are constantly improving at the MTS is really high on the product and the S. I.
Speaker Change: Said, so many times before for US is to keep the same volume right now because that we are dimensioning, our capacity our or capital in the best way and it's the most efficient way. So we will continue to be in this level and we think they are very important.
Speaker Change: I'm, hoping that of course that the consumers are using fixed wireless access that they were using the network as anybody else and that's what I said before we have dimension the Netflix to handle it. So that's not the challenge and the most important for US is that we all fiber I solo network and so we can transport all the data.
Speaker Change: The guys are doing great job on fixed wireless access across the board.
Speaker Change: Yeah, and then just one additional point there so the longer dated churn Simon is very strong and we're very pleased with the progress thus far on your other question on ACP. There's just maybe a few points to make here the guidance assumes that the ACP funding remains intact in the event. The funding goes away we have plans to address it and we'll see what happens there the.
Speaker Change: You already have the exposure on ACP.
Speaker Change: <unk> is in our prepaid business, we have about a 1.2 million prepaid subs that benefit from the from the ACP program and that's less than 10% of our our prepaid base on the postpaid side, we have minimal exposure to ACP, both by us and postpaid wireless and the margin exposure from ACP is very very small and on the.
Hans Vestberg: Our network is the foundation for how we offer the best value and premium experience to our customers, and we're now seeing our investment in CBAN paying off in terms of customer experience and loyalty. Where we have CBAN, we see higher gross ads, lower churn, and more step-ups to premium services. We also see an increased uptake of customers taking both mobility and broadband services. Meanwhile, Millimeter Wave, which we have now deployed in many urban areas and all 30 NFL stadiums, sets Verizon apart with an outstanding performance in high-intensity areas and public event spaces.
Speaker Change: Bead program.
Speaker Change: We will participate when that comes out in the markets, where we see we we can compete and where we see a good return on investment. We have already won a couple are in the early stages, but we expect that these will roll out over years to come.
Speaker Change: But again, we will see that we participate when it makes sense for us usually are not usually always would financial discipline.
Speaker Change: Great and just one follow up on the fiber build is that again about 500000, a pass a homes passed this year.
Speaker Change: Some of it will be a little bit over 400000 next year.
Speaker Change: Thanks, so much.
Speaker Change: Yeah. Thanks, Simon Brad we're ready for the next question.
Speaker Change: The next question comes from Phil Cusick of J P. Morgan Your line is open Sir.
Phil Cusick: Hi, Thank you I think you said you expect postpaid phone positive for the year, what's the durability of consumer growth could that also be positive for 2024 and remind us the impact of price increases tend to have on churn over the last couple of years and then second maybe you could just dig into where your gross adds are coming from the improvements as youre doing better there.
Hans Vestberg: And for the 32nd consecutive time, Verizon was the most awarded company in the country for wireless network quality, with first place rankings in each of the 80 powers' six regions. We are the network that America relies on, and we take that commitment very seriously. Looking ahead, our priorities for 2024 are crystal clear. We remain laser-focused on growing wider service revenue and expanding our adjusted EBITDA and free cash flow to allow for a meaningful debt reduction in the year ahead. This is what our whole team is working towards and what you, our shareholders, and our board want us to focus on. Tony will have more details for you, but we anticipate strong wider service revenue growth of 2% to 3.5% in 2024, which reflects our ability to sustain the top line of our business as we continue to pursue the right balance of profitability and customer growth. Our adjusted EBITDA profile will continue to improve as we become even more efficient through growth, cost-saving measures, and our disciplined promotional spending. Our capital allocation priorities remain consistent.
Phil Cusick: Churn has sort of been in line, but gross that's doing a lot better you could dig into that is there any significant shift in where customers are coming from maybe from my plan. Thank you.
Speaker Change: I can't you start by saying that they're going to hand, it over to Tony I think youre spot on our mine plan and I said it in my in my opening remarks, you know a stellar performer, so far or my plan.
But it's not only that the plan is good it's both flexible you are cost control and our customers.
Speaker Change: Value of it and I think that goes back to the what I talked about for four years disciplined approach, but also very segmented and that's what's happening right now and we can see that we're allocating money to the right product to the right customer in the right markets. So there's a lot of that but Tony will give you a little bit to round down on the numbers sure. So just.
Tony: Phil on the on the churn I mean, obviously, you will see a little bit of an uptick from the pricing changes we made in both in both consumer and business and those changes were announced in the last in the last few weeks and then as Hans mentioned, we really had good a good performance in consumer you saw the gross add number at 17% and 10% for the full year and that's despite being in a in a much.
Tony: Lower upgrade our environment as well.
Tony: So we feel really good that like I said earlier, the tier one markets, where we're very strong and we see further opportunity as we as we build out C band the churn profile.
Tony: Profile is much better the ARPA is much better so we're very comfortable with what we're seeing so far with the C band and and the performance.
Tony: And in terms of the durability of postpaid and gross there.
Speaker Change: Yeah look we are we said we're going to be a postpaid phone positive in consumer and in in 'twenty 'twenty four and we'll also continue to see strong momentum in business as well we did a 562000 net adds this year and Kyle and the team did a great job and we expect continued solid growth from the business side as well.
Tony Skiatis: And as we lower our capital intensity from the C-band build-out and our new business structure, we expect to see continued strong free cash flow generation going forward. That will enable our board to continue to raise our dividend and also enable us to bring down leverage. Now, Tony will discuss the quarter as well as our operations and guidance in more detail. Thanks Hans and good morning.
Speaker Change: That's great. Thanks for everything yes, yeah, Thanks, Phil Brad we're ready for the next question.
Speaker Change: The next question comes from Michael Rollins of Citi. Your line is open Sir.
Michael I. Rollins: Thanks, Good morning, just one more on wireless pricing can you provide some additional context on how you're seeing the competitive landscape evolved with respect to pricing and how Verizon he's trying to balance the volume versus price equation as you look out.
Michael I. Rollins: From the recent pricing actions that you've taken and then second can you provide an update on how much the cost cutting programs yielded.
Michael I. Rollins: 'twenty three and how much you can capture it in 24 relative to the previously articulated targets. Thanks.
Tony Skiatis: Executing on our plan, we finish the year strong and deliver on our financial guidance. We exited the year with good momentum and remain committed to our three priorities of growing wireless service revenue, adjusted EBITDA, and free cash flow. In 2023, we set out to improve our operational performance while sustaining financial discipline. Our fourth quarter and full year results confirm that our strategy is working and that we can deliver strong financial results and improve key operating metrics. Consumer post-paid phone net ads totaled $318,000 for the quarter, a substantial improvement of $369,000 sequentially and $277,000 compared to the prior year.
Speaker Change: Thanks, Mike I think when it comes to.
Speaker Change: Our pricing and our promotions I think we look more about we are the leader in the market as we look at the different segments will have to see that we have the right offerings for our right customer with the right value. That's the focus we have had for I would say the last two years very much focused on our customer base and in the car.
Speaker Change: And the consumers and the customers, we can attract the Verizon and so far that disciplined approach. We'll have you saw the fourth quarter. For example, we invested a little bit more because we have really good momentum.
Speaker Change: So sometimes we're going to invest more but it's always going to be with a return on investment in mind to see that we're doing the right for all our stakeholders. So that's that's our focus will have on the pricing both on broadband and on our wireless on the cost program 23 was a big year for us.
Speaker Change: You, probably followed all our press releases, but we did a lot in customer care. We did a lot with the managed services with outsourcing with H L. We implemented some really large IP systems and application that's going to be a fantastic platform. We continued to the deploy our offshore.
Centres, I'm being even stronger I'm using that as a platform on.
Speaker Change: On the basis that we created a price on global services the.
The first of January 23, so I'm really pleased with the platforms and that means we're on track for the savings we talked about going into 'twenty before it's more about the same Tony.
Speaker Change: Sure. So just to add a couple of things here. So on the on 2020 three we delivered about $3 million to $400 million in savings and as Hans mentioned, we expect the program to ramp in 2024 and the savings are contemplated in the guide you know a portion of it will hit the bottom line, while also giving us the flexibility to invest in the business and I think you saw that in the fourth.
Tony Skiatis: Our consumer post-paid phone churn of 0.88% represents a stable result even after we implemented over $1 billion of annualized pricing actions in 2023. While we do not provide specific guidance on volumes, we wanted to share a couple of things as we look into 2024. In the first quarter, we are taking additional targeted pricing actions that we expect will result in incremental pressure on consumer post-paid phone churn during the period. However, we expect to deliver positive consumer postpaid phone net ads in full year 2024 as we execute on our strategy of growing our subscriber base while being financially disciplined. Post-paid phone gross ads in the quarter were up nearly 17% year over year.
Speaker Change: Quarter and the results speak for themselves, we're not going to give specific cost targets, but you know what in addition to what Hans mentioned you know we have work going on in an I T platform transformation real estate and fleet optimization and we're also opening up a shared service center in Ireland. So we feel really good about the cost actions that are driving the the EBIT improvements that you see in the guidance for this year.
<unk>.
Speaker Change: And just one other where are you in the process of restructuring the business wireline operations and how close.
Speaker Change: Are you to an inflection where that technique.
Speaker Change: Technique stabilized financially or potentially eventually grow at some point thanks. Thank.
Speaker Change: No that's a big focus for us.
Speaker Change: The secular decline and we've had that for quite a while so that's nothing new and nothing.
Speaker Change: New to that our story, but our cost efficiencies of course happening very very quickly on the team is doing great job not only that we also see that we have the right pricing for our customers and also seen where we don't have great.
Contract, we have decided to walk away from them, so very much a tackling blocking and tackling to see that we're continuing to improve and of course our.
Tony Skiatis: This represents our best quarterly consumer growth stat performance in four years. Our attractive My Plan offers, combined with our segmented approach to the market, regional sales structure, and disciplined promotional strategy, continue to deliver strong results. Additionally, post-paid upgrades remain lower as compared to the prior year. The consumer post-paid upgrade rate was 4.4% in the fourth quarter, down 120 basis points year-over-year as a result of approximately 19% fewer upgrades.
Speaker Change: Target is to go to.
Speaker Change: Get that to a sort of being neutral to our two R. E to our P&L all the time and that is one of the important pieces for getting to 25% of the Verizon business group.
Speaker Change: You may be thought, but not only that of course, we're offsetting that by growing our wireless basis on our broadband business. So typical managed mentally product portfolio and I would say Kyle and the team is doing great job with full support from Tony on me.
Speaker Change: Thanks, Yeah, Thanks, Mike Brad we're ready for the next question.
Speaker Change: The next question comes from Frank Louthan of Raymond James. Please go ahead Sir.
Frank Louthan: Great. Thank you so you've made a lot of changes in the last year to kind of retail marketing to correct. Some of the past periods now I've got a new CMO what can we expect her to be doing differently should we see this as another reset or change of direction, how should we think about that adjustment. Thanks.
Tony Skiatis: As Hans said, we continue to see better performance in markets where we have deployed CBAN. In our first 76 C-band markets, fourth-quarter consumer post-paid phone gross ad growth was 8 percentage points better than in non-C-band markets. Additionally, consumer postpaid phone churn in C-band markets was four basis points better than in non-C-band markets. The strong momentum in the quarter, combined with the continued deployment of our seed band network, positions us well in 2024. The quality of the business we are riding in the consumer remains high, as my plan continues to drive premium plan adoption. The premium take rate in C-band markets for the quarter was more than 10 percentage points higher than in non-C-band markets.
Frank Louthan: Youre right last year, we did the Lotto changes about the looking at the result, I think many of the giant changes both absolute the right all the way from our structural changes to go to market. The product and also we did quite a lot of management changes getting to a minority executive any new positions, including Daimler a recruiting.
Frank Louthan: New CMO unless they burn them. We're excited to have her own I think where we are with our brand and with our offerings. We're in a great place, but you know you cannot see it still here and that's why we recruited lastly, unless they would work with the full team to see how we continue to refine the leadership in the brand because we are the number one brand in a market, where you are going to refine that but.
We're not going to sit still you know so I think lastly, we ended with two weeks. So I see a lot of great initiatives and ideas and we would work together or does it make these company even better.
Speaker Change: Okay, great. Thank you yeah. Thanks, Frank Brad we're ready for next question.
Speaker Change: The next question comes from David Barden of Bank of America. Your line is open Sir.
David Barden: Hey, guys. Thanks for taking the questions.
David Barden: A couple if I could just the first.
David Barden: You went out of your way to highlight how well fixed wireless access is doing in the C band markets.
David Barden: You know these are kind of the main markets, probably the densest markets.
David Barden: Obviously, we're going to see the C band deployment.
David Barden: Both in terms of spectrum density in and in terms of geography.
Tony Skiatis: Consumer ARPA of $134.10 represents an increase of 4.7% year over year, and this was driven by new customer additions. Premium Plan Adoption and Fixed Wireless Subscriber Growth. We expect continued and healthy organic ARPA growth in 2024. Our prepaid results remain challenged in the fourth quarter. This is, in part, due to seasonally weaker national retail sales volumes, which is the primary sales channel for our TracFoam brand. We also continue to see pricing pressures from low-end, post-paid offerings. Prepaid net losses for the quarter were $289,000.
David Barden: You know 350, it's been kind of the.
David Barden: Baseline expectation for fixed wireless access ads in the current C band deployment would you be willing to put a stake in the ground.
David Barden: Where could that go could that cause that double.
David Barden: By the time, we get the full C band deployment out there by the end of next year.
Speaker Change: That's the first question and I guess the second question.
Speaker Change: Tony you gave us the kind of moving parts that EBITDA growth, 2%. That's about three quarters of 1 billion. After tax interest expense at 17 and a half since that's about 3 billion three quarters of 1 billion after.
Speaker Change: After tax one and a half billion capex savings so the big moving part that none of US really know is the cash tax and how that might impact free cash flow, whether free cash flow could be up a little bit down a little bit could you be more transparent around around that moving part. Thank you so much.
Speaker Change: Thank you David when it comes to fixed was Texas Ah Yeah. When we got the C band the initial eh Sionko spectrum or got worse in urban places now.
Tony Skiatis: During the quarter, we saw continued strong growth within the visible and totaled by Verizon brands, which we will continue to scale. The team is also focused on our partnerships to improve the performance of the Straight Talk brand. We believe we're taking the right steps to better position our offerings in the market and expect to see some stabilization in 2024. Verizon Business delivered another strong quarter with 131,000 Phonet ads, which, as Hans mentioned, is our 10th consecutive quarter above 125,000.
Speaker Change: The low end of the third quarter, we got a suburb in rural areas, but to continue at the end of the year to a two two to strengthen our urban area. So now that we're sort of deploying much more in the suburban and rural and that creates a new opportunity for us.
Speaker Change: Both from a R.
Our strength in wireless and mainly on those market together with our fixed wireless access, but I've said it many times before.
Speaker Change: For us, it's very important to have a certain.
Speaker Change: Volume in a certain cadence because we can optimize our resources our capital etcetera, So Tony and I feel really good about being around 400000, net ads and if a broad money in total including files that have sort of been a man drop they can be of course coming up and down a little bit but it's.
Speaker Change: Luckily, we are forcing a lot of capital and resources, even in a quarter and then doing less than that that's not sufficient in a company like ours, we have a very financially disciplined as you know and that's best for our customers and for our stakeholders like like shareholder so that that's what you're going to expect from us.
Tony Skiatis: The Business Markets Group had its best phone net app performance in the last two years, demonstrating how our value proposition is resonating with small and medium businesses. Similar to consumer, we are taking pricing actions in the first quarter of business that could result in elevated phone churn during the period. However, we are confident that we will continue to deliver strong business volumes in 2024. Moving on to broadband, we delivered 413,000 net additions in the quarter, continuing the pace of over 400,000 broadband net additions for the fifth consecutive quarter. We see strong demand for both our fiber and fixed wireless offerings, and we continue to see positive responses from customers regarding the quality and reliability of our service. In fixed wireless, we delivered 375,000 net ads for the quarter, growing the base to over 3 million subscribers.
Speaker Change: And Dave just on your question on cash taxes. So we said you know we're gonna be pressured by the phaseout of bonus.
Speaker Change: We did see a tax benefit in 2023 from the spectrum clearing payments and if you think about the headwind we'd see it at about $2 billion right now and we'll have to see how things play out with what the proposed legislation is.
Speaker Change: Perfect. That's helpful guys. Thank you so much thanks, Dave Brad we're ready for next question.
Speaker Change: The next question comes from Craig Moffett of Moffett Nathanson. Your line is now open.
Craig Moffett: Yes, hi.
Craig Moffett: I Wonder if you could talk about your market growth expectations for postpaid coming into the year I know you're the first wanted to report so we haven't seen the results from anyone else yet, but what's your sense of what we can expect in terms of of.
Craig Moffett: Total postpaid and maybe total phone growth.
Craig Moffett: For 2024 market wide.
Speaker Change: Thank you Greg.
Speaker Change: If I think about this year, but first of all what mobility and broadband it's two of the most important infrastructure in the country I don't think anyone.
Speaker Change: Company, a person organization can leave without those services.
Speaker Change: We are now number one in basically everything we're doing I think it's a healthy industry. It's an important important product will have done it can come up and down so I cannot give you a percentage what's going to happen I think our offering is great. I think the product is so important both mobility and broadband for all parts of our society.
Speaker Change: I wouldn't like to be in any other bdcs in this it's a it's sort of are so important for our society that mobility and broadband is working.
Tony Skiatis: We launched C-Band in early 2022, and our fixed wireless success in the last two years reflects a strong demand for high-quality broadband and the strength and reliability of our product. Notably, in the fourth quarter, over 80% of our consumer fixed wireless gross ads came from C-Band markets. The growth trajectory for fixed wireless continues to be robust, and we are ahead of schedule to achieve our 4 to 5 million subscriber goal by year-end 2025. Fios Internet net ads were 55,000, down 4,000 year over year.
Speaker Change: Okay.
Speaker Change: Can I, just maybe drill down a little bit though.
Speaker Change: Hey.
Speaker Change: Growth numbers, we've seen have been.
Speaker Change: As high as 6 million plus.
Speaker Change: Is that is that a feasible growth rate.
Speaker Change: Population growth, including immigration is is more like $3 million.
Speaker Change: Is your sense as you go into set your own expectations for the year that we'll see some deceleration or is your sense that there's still something going on that's keeping growth so far in excess of population growth.
I think that the way we were going to whatever number it is going to be are we going to get their fair share of it and that's what we are aiming for but you're right of course immigration is lower so the pool is smaller but we've also seen a really good uptake here between our value segment too.
Tony Skiatis: We are pleased with the success of Fios with strong gross advertising and retention, reflecting the quality and overall value of the product. We expect broadband subscriber momentum to extend into 2024 as we continue deployment of our C-band spectrum, further expand our Fios footprint, and bring new products and offers to the market. Let's now look at our financials. Consolidated revenue for the fourth quarter was $35.1 billion, down 0.3% year over year.
Speaker Change: Two postpaid so it's a lot of factors coming in and then of course, what we have done and I think about the offerings where my plan.
Speaker Change: The perks that for example, Netflix and Max we are expanding also ARPA, because we have such a great offerings to our customers. So this is a new time, but again the product is so important for the market and for each and every one in the us So I feel really good about coming into this year, what we have done them wherever we go and let's see where we end up.
Speaker Change: Okay. Thank you.
Speaker Change: Craig Brad ready for the next question.
Craig: The next question comes from commands and could touch were from Barclays. Your line is open Sir.
Tony Skiatis: This change can be attributed to wireless equipment revenue, which was approximately 2% lower than the prior year, as total post-paid upgrades declined by approximately 18%. Total wireless service revenue was $19.4 billion, up 3.2% year over year. Strong revenue benefited from targeted pricing actions, more customers selecting premium unlimited plans, and growth in fixed wireless access. However, this was partially offset by pressure from prepaid, which reduced total wireless service revenue growth by approximately 70 basis points year over year, as well as promotion amortization. Consolidated adjusted EBIT in the quarter was $11.7 billion, a decrease of 0.6% compared to the prior year.
Craig: Yeah.
So maybe a couple of them I guess, firstly on the fiber side.
Craig: Think about the base of fixed wireless subscribers by next year, you'll have a pretty big critical mass overall.
Speaker Change: Oh, well, you know 5 million plus potentially.
Speaker Change: And it's not too far away from there you'll find those basis, then you have deep money coming in potentially you know there's more interest from private equity funds and so on and so forth.
Speaker Change: And I know you talked about being a lot more disciplined on fiber, but that's your breakeven thresholds change just given the kind of critical mass you get doing fixed wireless and also the kind of capital are done or does that get starting to see in the market.
Speaker Change: That's one and secondly on the wireless side.
Speaker Change: Over the last two or three years, I mean, obviously theres been a pretty big tailwind to service revenue from prices and explicit pricing seasons.
Speaker Change:
Speaker Change: So your thoughts on you know how long that can continue and vendor mixed equal where and become a bigger component of it all.
Speaker Change: From a service with a revenue growth perspective, and how we should expect that transition to happen it would be helpful. Thank.
Tony Skiatis: Higher wireless service revenue and the benefits of lower upgrades were more than offset by higher marketing and bad debt expense and ongoing declines in business wireline revenue. The Adjusted EBITDA margin of 33.2% was relatively flat year over year. In 2023, we implemented transformations within our consumer customer care group, as well as for business managed services. We are pleased with what we have achieved this year, and our cost-saving measures are meeting our expectations. We expect further progress on our cost efficiency program in 2025. Adjusted EPS was $1.08, resulting in full year adjusted EPS of $4.71.
Speaker Change: Thank you.
Speaker Change: I have to go back a little bit when it comes to a broadbrush Rhapsody wherever multi purpose network we're building Netflix wants.
Speaker Change: Multiple options at the edge that was sort of the infancy of the Verizon intelligent edge network from the data center to the edge, we have harmonized everything we have fiber in between everything we have multi routers. We have one transport network that is super important and it sort of the brain or the network down at the edge we have.
What type of.
Speaker Change: Oh, all the access we have in the in the in the ILEC of course, we're going to continue with our success in files and outside we're doing fixed wireless access, but it gave us optionality over time.
Speaker Change: You know I like Orange economics, I think that that.
Speaker Change: It makes us very competitive in pricing and offerings to our customers. They're of course, a lot of offering from people that want to shipping capital, but ultimately it has paid off for us to be very very prudent and financially disciplined with our own money, but you know you can never out rule, but that's really my view on it.
Tony Skiatis: Turning to our cash flow summary, cash flow from operating activities for the fourth quarter was $8.7 billion, bringing the total for 2023 to $37.5 billion. This marks a year-over-year improvement of over $300 million primarily due to working capital improvement. CapEx for the quarter came in at $4.6 billion compared to $7.3 billion in the prior year.
Speaker Change: But I'm, creating optionality, we didn't have to work and Joe and his team are super agile if if we need the people within that on the wireless I would say M&A. If you look at our business side are they they have great offerings in the market. They have taken our fair share of it 10 quarters.
Speaker Change: And then have also made new offerings. So they can expand so I think they both have done a quantity.
Tony Skiatis: The full year of CapEx totaled $18.8 billion, which represents a more than $4 billion reduction in capital spending from 2022 as we come down from our peak C-band spending level. Free cash flow for the fourth quarter was $4.1 billion, bringing our year-to-date total to $18.7 billion, a $4.7 billion increase over the prior year driven by operational improvements and the lower capex spending that we previously noted. We are pleased to have delivered on our guidance of more than $18 billion of free cash flow for the full year, which reflects our balanced and strategic approach to delivering profitable growth. Net unsecured debt at the end of the quarter was $126.4 billion, a $1.6 billion improvement year over year.
And and value.
Speaker Change: And wireless of course on the consumer side, they have historically had more ore body.
Speaker Change: The increase with new offerings, new pricing new products, rather than volumes, but you have seen us performing in the lowest part of the year and nothing has happened and his team. They have said that they want to increase their part to get the new customers, but again, it will be financial discipline, and we should get the right customers in and.
Speaker Change: If you look at the quality of our consumer base.
Speaker Change: She was amazing and we will continue to be financially prudent on that but clearly we want to have more volumes, but not at any cost we will do it with the right cost and the right product to our customers.
Speaker Change: Great.
Speaker Change: Thanks, Thanks cannot hey, Brad we're ready for the next question.
Speaker Change: The next question comes from Peter Zaffino of Wolfe Research. Sir. Please go ahead with your question Hi.
Peter Zaffino: Thanks, Good morning on the subject of consumption in network utilization and I wondered if you could update us on the number of gigabytes per months that postpaid phone customers are consuming nowadays.
Tony Skiatis: Net unsecured debt increased sequentially primarily due to settling the $3.7 billion in incentive payments to satellite operators for our remaining C-band spectrum. Our net unsecured debt to consolidated adjusted EBITDA ratio was 2.6 times as of the end of the fourth quarter, in line with the prior two quarters. We expect the leveraging of the balance sheet to accelerate in 2024 as CapEx comes down to BAU levels and we continue to generate strong cash flow. Additionally, we continue to benefit from our approach to managing long-term debt and have only $3.6 billion of unsecured debt maturing in 2024. Overall, I'm pleased with our momentum through the year and our performance in 2023, delivering an improved operational profile while also meeting our financial guidance.
Peter Zaffino: And extending that.
Peter Zaffino: Over the next few years.
Peter Zaffino: Does that growth and the robust February business that you're building.
Peter Zaffino: So we should prepare for densification or other radio access network or spectrum costs for capacity over the next several years certainly not a 2024 question. Thanks.
Peter Zaffino: Yeah.
Peter Zaffino: I go back to how we build a network that goes to building. The network you saw reported because the biggest challenge with a lot of traffic is of course transporting it inefficient way, having your own fiber and that we have already built.
Peter Zaffino: When it comes to the growth in a netbook yeah, everybody is using the network more and it's no different we didn't even fixed wireless access and fires and and of course wireless consumers are using their network more as well, but we have built a very stable.
Stable NAV to work all the way from our data centers to the edge and then of course, we have a we have our assets that nobody else has.
Peter Zaffino: A lot of traffic on millimeter wave, which is a cheapest way to deliver data in the market by far and we have our C band he was coming out so.
Tony Skiatis: Now, I want to take a few moments to look ahead and walk through our 2024 guidance. Our 2024 guidance demonstrates our expectations for accelerating wireless service revenue growth. As a reminder, the reported 2023 wireless service revenue growth of 3.2% included approximately 190 basis points of benefit from a reallocation of other revenue. Excluding this reallocation, the 2023 wireless service revenue growth was 1.3%.
Peter Zaffino: Our best Engineers, so I feel really good with that people are buying.
Peter Zaffino: Customers are using our network more that's what this was intended for and we have designed it like that so.
Peter Zaffino: Great.
Speaker Change: Thanks Peter.
Speaker Change: Hey, Brad we're ready for next question.
Speaker Change: The next question comes from Bryan Kraft of Deutsche Bank. Your line is open Sir.
Bryan D. Kraft: Oh, hi, good morning.
Bryan D. Kraft: I had two if I could first following up on John's earlier question could you give us a sense for how much of the year over year improvement in gross ads in the fourth quarter was the result of healthy industry volumes versus the improved execution and product that you've got in the market now and additionally on that did you see stronger performance in <unk>.
Tony Skiatis: For 2024, we expect total wireless service revenue to grow between 2% and 3.5%. This will be driven by anticipated positive post-paid phone net additions in both consumer and business. Continued fixed wireless access subscriber growth and further adoption of Premium Unlimited plans. Growth in Products and Services and Pricing Action Benefits. We expect Consolidated Adjusted EBITDA to grow by 1 to 3% versus the prior year. This outlook reflects expected higher wireless service revenue and the impact of our cost transformation initiatives, partially offset by continued pressure on business wireline revenues and increased wireless network operating expense. Full year adjusted earnings per share is expected to be $4.50 to $4.70.
Speaker Change: Sember versus the rest of the quarter I asked because I think your last public presentation was in early December in your results seem to even more positive than your tone back then so it seems like maybe you picked up momentum as the quarter progressed, and then I just had a separate question.
Speaker Change: On the issue of led cables I was wondering if you would comment on the latest media report that D. P. A has conducted its own testing near some of your lead sheet cables that have shown that levels above the EPA standard for safety.
Speaker Change: You know any sense for whether these reports are accurate and if so how you're thinking about the potential impact at this point around this issue. Thank you yep. Thank you, Brian Let me start with the the market into the fourth quarter, we don't know them and the others have been reporting we only know that we have performed really well and but that has been at it.
Speaker Change: Not a one quarter phenomenon.
Tony Skiatis: As noted, we expect adjusted EBITDA to grow in 2024, offset by certain below-the-line impacts. Specifically, higher interest expense is expected to impact adjusted EPS by 16 to 19 cents, over 75% of which is driven by the continued reduction in capitalized interest related to the C-band licenses being placed into service. In addition, EPS is expected to be impacted by approximately 7 to 9 cents of higher pension and OPEB expense, primarily due to the expiration of certain credits.
Speaker Change: If you think about from the second quarter third quarter, even in the first quarter, we were sequentially improving all the time and we have done that in a very disciplined way with a lot of actions and that we need to keep up so and then the comment on how the quarter shaped so you'll probably talk about consumer more than anything else.
Speaker Change: We're solid through the quarter it was nothing.
Speaker Change: It's sort of different in during the month in the quarter were solid through the quarter doing well performance.
Speaker Change: On the lead.
As I said before we take that very seriously and I cannot comment would be I don't need to do we will work with all the agencies to see that we are following this up and and we have a we have revealed all information labs, where we don't have any more we have also disclosed how much lib cable will have in the network, which is very little but again, we'd take it.
Speaker Change: And we work with all agencies.
Speaker Change: Great. Okay. Thank you yeah, Thanks, Brian Hey, Brad we have time for one more question.
Speaker Change: Your last question will come from Walter Piecyk of like Chad. Your line is open Sir.
Speaker Change: Thanks.
Walter Piecyk: This is I'm I apologize probably the fourth time, you're coming back to the gross add question, but.
Tony Skiatis: This impact will flow through the other income and expense lines on our income statement. We expect depreciation and amortization to be relatively flat in 2024 compared to 2023. Our adjusted effective income tax rate is expected to be in the range of 22.5% to 24% based on current legislation.
Walter Piecyk: I think earlier you made mention of kind of the change in structure from rationalization of the localization I think that was something that same path has had kind of.
Walter Piecyk: Stated as one of the specific things and probably something that maybe it could be more sustainable than just a change in our rate plan that obviously can be replicated or just <unk>.
Speaker Change: As the markets I've, just a couple of questions on that first.
Speaker Change: If you think about kind of the ramp in fourth quarter.
Speaker Change: I know this is kind of a soft question, but like the the impact of the localization and that change in the structure of the sales organization.
Tony Skiatis: As discussed in prior quarters, capital spending for the full year is expected to be between $17 and $17.5 billion, down from $18.8 billion in 2023. While we are not providing guidance on 2024 free cash flow, we wanted to provide some additional color to aid with your analysis. Tailwinds to free cash flow will come from our adjusted EBITDA growth outlook, as well as the expected $1.5 billion reduction in CapEx in 2024, based on the midpoint of our guided CapEx range. However, offsets will be higher interest expense and higher cash taxes. As a reminder, the majority of the higher interest expense relates to reductions in capitalized interest.
Speaker Change: Versus my plan, which had a larger impact and then I guess more importantly.
Speaker Change: You know the sustainability, meaning that yeah, we typically do see.
Speaker Change: Sequential growth seasonally around this time of year, obviously more pronounced this year than in past.
Speaker Change: But are we going to see even more sequential growth or you know more abnormal growth in the first half of the year as some of the implementation of that localization continues or if we largely already seen that impact us as we go into 2024. Thank you.
Speaker Change: Hey, well well I think that was a it's a good question. So the the whole which started with remember we started with the network as the C band is it sort of rolling out in different ZIP codes. All the time, we are engaging locally the same with dealing with a consumer group to be much more local to be able to do local marketing kt for the law.
Speaker Change: Markets have local flavors all of our marketing we worked with the sports leagues like the NFL, Linda and the teams in different markets, you'll see that that happens so of course I'm going to attribute a portion of our oh growth during the year to the decentralization, but we just got started to see that we have that team in place and and sound pedantic.
Tony Skiatis: Such interest was recognized in cash flow from investing prior to placing the C-band spectrum into service. The higher cash taxes are primarily related to the continued phase-out of bonus depreciation in 2024 based on current legislation. Overall, we expect a strong free cash flow profile that will support our capital allocation priorities and position us for meaningful unsecured debt reduction in 2024, which we expect to come in the latter half of the year. With that, I will now turn the call back over to Hans for his closing thoughts. Thank you, Tony.
Team are working with them.
Speaker Change: This market precedents are making but it's also a sign of where the market is go when you you need to be local and you need to be on the ground in in the different societies in order to perform them and being knowledge and Verizon is most visible in all those grounds and now we're taking next step without struck.
Speaker Change: So very pleased what I've seen so far but more to be done.
Speaker Change: Yeah, well just to add onto what what Hans said, you know the regional structure or is a lot closer to the customer and we brought in the business. This way for many many years and we can do things like different promos for different markets and local resources and decision, making and the localization offset some of the price up as well. So we feel really good about where we're heading especially with the tier.
Hans Vestberg: As you heard today, we're confident and well-positioned to deliver a solid 2024. Thanks to our best-in-class network, which is only getting better, we offer the mobile and broadband services that customers value and need the most. Our industry is critical to the next wave of innovation, and Verizon is ready to capitalize on the opportunity of the AI economy to bring this technology to life for all our stakeholders.
Two in tier three rollouts with C band and the opportunity that provides.
Tony can you also remind us when the board considers share repurchase as it relates to leverage I think the leverage that you mentioned earlier in the call.
Speaker Change: Exclude unsecured debt because you were referencing two six number.
Speaker Change: Assuming we're we're basing it off the two six number.
Speaker Change: Your target your long term target was too got zero. So clearly you're if you wouldn't let it go below two zero before you start buying stock back but is there a consideration under two five where the board starts to consider share repurchase. Thank you. Thank you well I think this is something that we're being very disciplined capital allocation approach is clear number one.
Hans Vestberg: As I said in the beginning, we have the right team in place to execute the next chapter in Verizon's history. I'm proud of the work our team accomplished in 2023, and I'm excited about what we will deliver in 2024. Our results in C-band markets speak for themselves and support our investment decisions, and we're going to lean in further as we expand into suburban and rural markets while maintaining the financial discipline you have come to expect from us. We will continue to stay very close to our customers to understand their needs and preferences so that we can offer the right promotions at the right times in the right markets. We have the right people, the right assets, and the right strategy. Our focus for 2024 is on execution. It's a winning combination, and we are very confident heading into this year.
Speaker Change: The money to the business basically our capex number to continue to put the board in a place where they can continue to increase our dividend and number three paying down depth when would come down to 225, but we have said, we will start considering buybacks, but our ultimate long term goal is to get around too so.
Speaker Change: Yeah that that that's the plan, but of course, it will play in where the market. These are where the interest rates are where the capital is and where our equity is but clearly that's the plan we have right now and and the board is fully attuned to that plan.
Speaker Change: Thank you.
Speaker Change: Yeah. Thanks Walt.
Speaker Change: Back to you.
Speaker Change: Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation and for using Verizon Conference services you may now disconnect.
Speaker Change: Yeah.
George Brady Connor: Finally, I want to remind you that we are hosting an investor event on February 5th and encourage everyone to tune in to the webcast. Given the financial update today, next month will be more of an operational and strategic update on the company. Now, Brady, we're ready to take questions.
Operator: Thanks, Hans. Brad, we're ready for the first question. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1. Please unmute your phone and record your name clearly when prompted. Your name is required to introduce your question. To withdraw your request, please press star 2.
John C. Hodulik: One moment for the first question. The first question will come from John Hodulik of UBS. Your line is open, sir.
Hans Vestberg: Hey, thanks. Good morning, guys. I'd love to drill down on a couple of things. First, the subtrends. 17% growth is some real momentum. I know, Hans, you talked to a number of potential drivers, but if there's anything you could be specific and talk about what drove that in the quarter, and is that likely to continue? Also, the account growth, is that likely to continue? And then you talked about some churn on the price increase; anything you could say about the net ad momentum as we look into 24? That's first, and maybe for Tony, nice service revenue growth. Any additional info you can give us to sort of unpack that in terms of the price increase impact versus last year and what you're seeing in terms of curing, that'd be great, thanks. Hey John, thank you for the question. So let me start with the subs then.
Hans Vestberg: On the business side, 10th quarter in a row, more than 125,000. Kyle and the team are doing a great job. Our network is performing so well, so our customers just continue to buy in with us. Not only that, our offerings in our go-to-market are as strong as ever. So we feel really good about what Kyle and the team are doing.
Hans Vestberg: On the consumer side, yeah, we had a good fourth quarter, but you have seen also through the year that we have sequentially improved all the time. Everything started when we started with a new offering, my plan, which resonates with the market and has very much consumer insights in it. Then, on top of that, Sampat has done a lot of changes in our structure, all the way from the go-to-market, the incentives in our stores, and our decentralization. So it hangs together all the way.
Hans Vestberg: So I think the most important thing is that we have the right offerings in the market, and that has really resonated on the consumer side. So I'm really happy with the team. We will continue to execute on the plan we have, and we are starting. Hey, John. It's Tony.
Tony Skiatis: Good morning. So, just to add to what Hans mentioned, we did really well in Tier 1 markets. As we mentioned in the prepared remarks, about 8 percentage points better. And we were also net ad positive in both Tier 2 and Tier 3 markets as well. You know, we have improved our competitive positioning against all providers. We continue to build out C-band, as we said earlier, and in suburban and rural markets, and we see further opportunity there. And as Hans mentioned, we have strong momentum in the VBG side as well as in both mobility and FWA, so good results. And then on your question about service revenue, we feel really good about the shape of service revenue in 2024. The guidance that we gave of 2 to 3.5 percent reflects accelerated growth, and we talked about the jump-off point of 1.3 percent in the prepared remarks.
Tony Skiatis: The midpoint of our guidance range implies over $2 billion of service revenue growth. If we think about the assumptions in the guide, in terms of tailwinds, as you know, we've executed a number of pricing actions in the back half of 2023 that do carry into 2024, as well as in recent weeks, we've taken further pricing actions in both consumer and business that will provide a tailwind. We also have an improving volume profile in our consumer business, as we said in the prepared remarks. We expect to have positive phone net ads in consumer in 2024 and stable business volumes as well. And then the third tailwind I'd point to is an increasing contribution from fixed wireless access. We have really good momentum and over 3 million subs in the base.
Tony Skiatis: In terms of headwinds, prepaid has been a drag on service revenue, both in the fourth quarter and the full year. It was about $142 million in the fourth quarter, and we expect the prepaid headwinds to continue into 2024 as we stabilize that business. And then on pro-mimerization, that continues to be a headwind, with the increase in 2024 similar to the increase we experienced in 2023. But when you put that all together, we like the trajectory of service revenue. That's a great detail.
Tony Skiatis: Thanks, guys. Yeah, Brad, we're ready for the next question. The next question comes from Simon Flannery of Morgan Stanley. Your line is open. Great. Thank you very much. Good morning.
Simon Flannery: Just following up on the fixed wireless, could you just give us a little bit of color around how the churn is performing? What are you seeing in terms of those cohorts that have had this service for some time, and any comments on sort of capacity and so forth? And also, are you seeing emerging seasonality in this product driven by strong back-to-school demand in Q3 and then maybe a little bit softer in Q4? And then anything you can color you can provide on your exposure to ACP and how that may affect you and your latest thoughts on the BEAT program.
Hans Vestberg: Thank you. Okay, thank you. On fixed finance access, I think the product is maturing. We're now past 3 million subscribers both on the business side and the consumer side together. Clearly, the rollout and the product is unique. It resonates so well in the market because of the simplicity of the product and installing it, which was our idea. And even if we took out the discount that we had in the third quarter, we haven't seen any slowdown. The product is responding so well.
Hans Vestberg: We are constantly improving it. The MPS is really high on the product. And as I said so many times before, for us, it's to keep the same volume right now because we are dimensioning our capacity, and our capital in the best way. It's the most efficient way.
Hans Vestberg: So we will continue to be at these levels, and we think they're very important. And on top of that, of course, our consumers using fixed finance access are using the network the same way anybody else is. And as I said before, we have dimensioned the network to handle it. So that's not the challenge.
Hans Vestberg: And the most important thing for us is that we have fiberized our entire network, and so we can transport all the data. The guys are doing a great job on fixed finance access across the board. Yeah, and then just one additional point there.
Tony Skiatis: So the longer-dated Sharon-Simon is very strong, and we're very pleased with the progress thus far. On your other question on the ACP, there are just maybe a few points to make here. The guidance assumes that the ACP funding remains intact in the event that the funding goes away.
Tony Skiatis: We have plans to address it, and we'll see what happens there. The majority of our exposure on ACP is in our prepaid business. We have about 1.2 million prepaid subscribers that benefit from the ACP program, and that's less than 10 percent of our prepaid base. On the postpaid side, we have minimal exposure to ACP, both Fios and postpaid wireless, and the margin exposure from ACP is very, very small. And on the DEED program, we will participate when that comes out in the market where we see that we can compete and where we see a good return on investment. We have already won a couple in the early stages, but we expect that these will roll out over years to come.
Hans Vestberg: But again, we will see that we participate when it makes sense for us, usually or not usually, always with financial discipline. Great. And just one follow-up on the fiber bill. Is that again about 500,000 homes passed this year? Yes, Simon. We'll be a little bit over 400,000 next year. Thanks so much.
Tony Skiatis: Yeah, thanks, Simon. Brad, we're ready for the next question. The next question comes from Phil Cusick of J.P. Morgan. Your line is open.
Phil Cusick: Hi. Thank you. I think you said you expected postpaid phone growth to be positive for the year. What's the durability of consumer growth? Could that also be positive for 2024?
Hans Vestberg: And remind us the impact that price increases tend to have on churn over the last couple of years? And then second, maybe you could just dig into where your gross ads are coming from, the improvements as you're doing better there. Churn has sort of been in line, but gross ad's doing a lot better. You could dig into that.
Hans Vestberg: Is there any significant shift in where customers are coming from, maybe from MyPlan? Thank you. Sure. I can just start by saying, but I'm going to hand it over to Tony.
Hans Vestberg: I think you're spot on, or my plan, and I said it in my opening remarks, you know, stellar performance so far on my plan. But it's not only that the plan is good; it's both flexible, you have cost control, and our customers get value from it. And I think that goes back to what I talked about for years, a disciplined approach, but also very segmented. And that's what's happening right now, and we can see that we allocate money to the right product, to the right customer, in the right market. So there's a lot of that, but Tony will give you a little bit to round down on the numbers.
Tony Skiatis: Sure. So, Phil, on the churn, I mean, obviously, we'll see a little bit of an uptick from the pricing changes we made in both consumer and business, and those changes were announced in the last few weeks. And then, as Hans mentioned, we really had good performance in consumer. You saw the gross ad number at 17% and 10% for the full year, and that's despite being in a much lower upgrade environment as well. So we feel really good. Like I said earlier, the tier one markets were very strong, and we see further opportunity as we build out C-band. The churn profile is much better, the ARPA is much better, so we're very comfortable with what we're seeing so far with C-band and its performance, and in terms of the durability of post-fade and growth there.
Tony Skiatis: Yeah, look, we said we're going to be postpaid, phone positive, and consumer in 2024. And we'll also continue to see strong momentum in business as well. We did 562,000 net ads this year, and Kyle and the team did a great job. And we expect continued solid growth from the business side as well. That's great.
Phil Cusick: Thanks for everything, guys. Yeah, thanks, Phil. Brad, we're ready for the next question. The next question comes from Michael Rollins of Citi. Your line is open, sir. Thanks. Good morning.
Michael I. Rollins: Just, you know, one more on the wireless price. Thank you. Can you provide some additional context on how you're seeing the competitive landscape evolve with respect to pricing and how Verizon is trying to balance the volume versus price equation as you look out from the recent pricing actions that you've taken? And then, second, can you provide an update on how much the cost-cutting program yielded in 23 and how much you can capture in 24 relative to the previously articulated targets? Thanks.
Hans Vestberg: Thanks, Mike. I think when it comes to our pricing and our promotions, I think we look more like we are the leader in the market. We look at the different segments. We have to see that we have the right offerings for our right customers with the right values. That's the focus we have had for, I would say, the last two years, very much focused on our customer base and the consumers and the customers we can attract to Verizon. And so far, that disciplined approach we have, you saw in the fourth quarter, for example, we invested a little bit more because we have really good momentum. So sometimes we're going to invest more, but it's always going to be with a return on investment in mind to see that we're doing the right thing for all our stakeholders. So that's the focus we have on the pricing we have, both on broadband and on wireless. On the cost program, 2023 was a big year for us.
Hans Vestberg: You're probably following all our press releases, but we did a lot with customer care. We did a lot with managed services, and outsourcing with HL. We implemented some really large IT systems and an application that's going to be a fantastic platform. We continue to deploy our offshore centers and be even stronger using that as a platform on the basis that we created Verizon Global Services on the 1st of January, 2023. So I'm really pleased with the platforms, and that means we're on track for the savings we talked about going into 2024. It's more about the same.
Tony Skiatis: Sure. So, just to add a couple of things here. So, in 2023, we delivered about $300 to $400 million in savings. And as Hans mentioned, you know, we expect the program to ramp up in 2024, and the savings are contemplated in the guide. You know, a portion will hit the bottom line while also giving us the flexibility to invest in the business. And I think you saw that in the fourth quarter, and the results speak for themselves.
Tony Skiatis: We're not going to give specific cost targets, but you know what? In addition to what Hans mentioned, we have work going on in IT platform transformation, real estate and fleet optimization, and we're also opening up a shared service center in Ireland. So, we feel really good about the cost actions that are driving the EBIT improvements that you see in the guidance for this year. And just one more question, where are you in the process of restructuring the business wireline operations, and how close are you to an inflection where that segment can stabilize financially or potentially eventually grow at some point? Thank you, Mike. No, that's a big focus for us. We have secular decline, and we've had that for quite a while. So there's nothing new, and there's nothing new to that story.
Hans Vestberg: But our cost efficiency is, of course, happening very, very quickly, and the team is doing a great job. Not only that, but we also see that we have the right prices for our customers, and also see where we don't have great contracts; we have decided to walk away from them. So, very much tackling, blocking, and tackling to see that we continue to improve.
Hans Vestberg: And, of course, our target is to get that to sort of be neutral to our P&L over time. And that is one of the important pieces for getting 25% of the Verizon Business Group in EBITDA. But not only that, of course, we're offsetting that by growing our wireless business and our broadband business. So typical management of a product portfolio, and I would say Kyle and the team are doing a great job with the full support from Tony and me. Thanks.
Hans Vestberg: Yeah, thanks, Mike. We're ready for the next question. The next question comes from Frank Lowden of Raymond James. Please go ahead. Great, thank you.
Hans Vestberg: So you've made a lot of changes in the last year to kind of retail marketing to correct some of the past periods. You've now got a new CMO. What can we expect her to be doing differently?
Hans Vestberg: Should we see this as another reset or change of direction? How should we think about that adjustment? Thanks. You're right.
Hans Vestberg: Last year, we did a lot of changes, but looking at the results, I think many of the changes were absolutely right, all the way from our structural changes to go to market, the products. And also, we did quite a lot of management changes, getting many of the executives in new positions, including recruiting a new CMO in Leslie Berlin. We're excited to have her on board.
Hans Vestberg: I think where we are with our brand and with our offerings, we're in a great place, but you cannot sit still here, and that's why we recruited Leslie. Leslie will work with the full team to see how we continue to refine leadership in the brand because we are the number one brand in the market. We're just going to refine that, but we're not going to sit still, you know. So, I think Leslie has been here for two weeks, so I see a lot of great initiatives and ideas, and we will work together with her to make this company even better. Okay, great.
Hans Vestberg: Thank you. Yeah, thanks, Frank. Brad, we're ready for the next question. The next question comes from David Barden of Bank of America. Your line is open, sir.
David Barden: Hey, guys. Thanks for taking the questions. A couple, if I could.
Hans Vestberg: Just the first, you went out of your way to highlight how well fixed-worth access is doing in the CBAN markets. You know, these are kind of the main markets, probably the densest markets. Obviously, we're going to see the CBAN deployment expand, both in terms of spectrum density and in terms of geography. You know, $3.50 has been kind of the baseline expectation for fixed-worth access ads in the current CBAN deployment. Would you be willing to put a stake in the ground? You know, where could that go?
Hans Vestberg: Could that double by the time we get the full CBAN deployment out there by the end of next year? That's the first question. And I guess the second question, Tony, you gave us the kind of moving parts, EBITDA growth of 2 percent. That's about three-quarters of a billion after tax. Interest expense at $0.175.
Hans Vestberg: That's about three-quarters of a billion after tax, $1.5 billion in capex savings. So, the big moving part that none of us really know is the cash tax and how that might impact free cash flow, whether free cash flow could be up a little bit, down a little bit. Could you be more transparent around that moving part?
Hans Vestberg: Thank you so much. Thank you, David. When it comes to fixed wireless access, yeah, when we got the C-band, the initial chunk of spectrum we got was in urban places. Now, since the end of the third quarter, we have got it in suburban and rural areas. But we continue to strengthen our urban areas at the end of the year. So now that we're sort of deploying much more in the suburban and rural areas, that creates a new opportunity for us, both from our strength in wireless in many of those markets together with our fixed wireless access. But I've said it many times before, for us, it's very important to have a certain volume and a certain cadence because we can optimize our resources, our capital, et cetera.
Hans Vestberg: So Tony and I feel really good about being around 400,000 net ads for broadband in total, including Fios. That has sort of been a mantra. It can be, of course, coming up and down a little bit, but it's not like we are forcing a lot of capital and resources in in a quarter and then doing it next. That's not efficient in a company like ours.
Hans Vestberg: We are very financially disciplined, as you know, and that's best for our customers and for our stakeholders, like shareholders. So that's what you're going to expect from us. And, Dave, just on your question on cash taxes, so we said, you know, we're going to be pressured by the phase-out of bonuses. But, you know, we did see a tax benefit in 2023 from the spectrum clearing payments, and if you think about the headwind, we'd see it at about $2 billion right now, and we'll have to see how things play out with the proposed legislation, Perfect. Helpful, guys.
Tony Skiatis: Yeah, thanks Dave. We're ready for the next question. The next question comes from Craig Moffett of Moffett Nathanson. Your line is open. Yes, hi. I wonder if you could talk about your market growth expectations for postpaid coming into the year. I know you're the first one to report, so we haven't seen the results from anyone else yet.
Craig Moffett: But what's your sense of what we can expect in terms of total postpaid and maybe total phone growth for 2024 market-wide? Thank you, Craig. If I think about this year, first of all, mobility and broadband are two of the most important infrastructures in the country, and I don't think anyone, company, person, organization can live without those services. We are number one in basically everything we do. I think it's a healthy industry. It's an important product we have, and it can go up and down. So I cannot give you a percentage of what's going to happen.
Hans Vestberg: I think our offering is great. I think the product is so important, both mobility and broadband, for all parts of our society. I wouldn't like to be in any other business than this.
Hans Vestberg: It's sort of so important for our society that mobility and broadband are working. And can I just maybe drill down a little bit though? The growth numbers we've seen have been as high as 6 million plus. Is that a feasible growth rate? Population growth, including immigration, is more like 3 million.
Hans Vestberg: Is your sense, as you go in to set your own expectations for the year, that we'll see some deceleration, or is your sense that there's still something going on that's keeping growth so far in excess of population growth? I think that we're going to, whatever number it's going to be, we're going to get our fair share of it, and that's what we are aiming for. But you're right, of course; immigration is lower, so the pool is smaller.
Hans Vestberg: But we've also seen a really good uptake between the value segment and postpaid. So there's a lot of factors coming in. And then, of course, what we have done, and I think about offerings, where my plan, we're adding the perks, for example, in Netflix and Max, we are expanding ARPA, because we have such a great offering to our customers. So this is a new time.
Hans Vestberg: But again, the product is so important for the market and for each and every one of us. So I feel really good about coming into this year, what we have done and where we're going. And let's see where we end up. Thank you.
Craig Moffett: Thanks, Craig. Brad, we're ready for the next question. The next question comes from Kanan Venkateswar from Barclays. Your line is open. Thank you.
Hans Vestberg: So maybe a couple of things, I guess, firstly, on the fiber side, Hans, as you think about the base of fixed wireless subscribers, by next year, you'll have a pretty big critical mass overall of, you know, 5 million plus potentially. And it's not too far away from where your FIOS base is, and you have big money coming in, potentially, you know, there's more interest from private equity funds, and so on And I know you've talked about being a lot more disciplined on fiber, but does your break-even threshold change, just given the kind of critical mass you get to in fixed wireless and also the kind of capital alternatives that we are starting to see in the market? That's one.
Hans Vestberg: And secondly, on the wireless side, you know, over the last two or three years, obviously, there's been a pretty big tailwind to service revenue from prices and explicit price increases. So your thoughts on how long that can continue and when MIGS will take over and become a bigger component overall from a service revenue growth perspective and how we should expect that transition to happen would be helpful. Thanks. Thank you, Kanan.
Hans Vestberg: I have to go back a little bit when it comes to our broadband strategy. We have a multipurpose network. We build the networks once, and we have multiple options at the edge. That was sort of the infancy of the Verizon Intelligent Edge Network.
Hans Vestberg: From the data center to the edge, we have harmonized everything. We have fiber in between everything. We have multi-routers. We have one transport network. That is super important. It's sort of the brain of the network.
Hans Vestberg: Then at the edge, we have optionality, what type of access we have. In ILAC, of course, we're going to continue with our success in Fios, and outside, we're doing fixed wireless access. But it gives us optionality over time. I like owner's economics.
Hans Vestberg: I think that that makes us very competitive in pricing and offerings to our customers. There are, of course, a lot of offers from people that want shipping capital, but ultimately, it has paid off for us to be very, very prudent in financial discipline with our own money. You can never outrun, but that's really my view on it.
Hans Vestberg: I'm creating optionality with the network, and Joe and his team are super agile if we need to pivot on that. On the wireless side, I would say if you look at our business side, they have great offerings in the market. They have taken a fair share over 10 quarters and then have also made new offerings so they can expand. I think they have done quantity and value. And wireless, of course, on the consumer side, they have historically had more ARPA increases with new offerings, new pricing, new products, rather than volumes. But you have seen us performing in the last part of the year.
Hans Vestberg: And I think Sampan and his team have said that they want to increase their share of getting new customers. But again, it will be financial discipline, and we should get the right customers. And if you look at the quality of our consumer base, it's just amazing. And we will continue to be financially prudent on that. But clearly, we want to have more volumes, but not at any cost.
Hans Vestberg: We will do it with the right cost and the right product for our customers. Great. Thanks. Thanks, Kanan.
Operator: Hey, Brad, we're ready for the next question. The next question comes from Peter Supino of Wolf Research. Sir, please go ahead with your question. Hi, thanks. Good morning.
Hans Vestberg: On the subject of consumption and network utilization, I wondered if you could update us on the number of gigabytes per month that postpaid phone customers are consuming nowadays. And extending that thought over the next few years, does that growth and the robust FWA business that you're building suggest that we should prepare for densification or other radio access network or spectrum costs for capacity over the next several years? Certainly not a 2024 question.
Hans Vestberg: Thanks. Yeah, I'll go back to how we built the network, because building the network is so important, because the biggest challenge with a lot of traffic is, of course, transporting it in an efficient way, having your own fiber, which we've already built. When it comes to growth on the network, yeah, everybody's using the network more. It's no different between fixed wireless access and Fios.
Hans Vestberg: And of course, wireless consumers are using the network more as well. But we have built a very stable network all the way from the data centers to the edge. And then, of course, we have assets that nobody else has. We have a lot of our traffic on millimeter wave, which is the cheapest way to deliver data in the market by far.
Hans Vestberg: And we have our C-band just coming out, and we have our best engineers. So I feel really good that people and customers are using our network more. That's what this was intended for.
Hans Vestberg: And we have designed it like that. Great. Thanks, Peter. Hey, Brad, we're ready for the next question. The next question comes from Bryan Kraft of Deutsche Bank. Your line is open. Hi, good morning. I would have two, if I could.
Bryan D. Kraft: First, following up on John's earlier question, can you give us a sense of how much of the year-over-year improvement in gross ads in the fourth quarter was the result of healthy industry volume versus the improved execution and product that you've got in the market now? And additionally on that, did you see stronger performance in December versus the rest of the quarter? I ask because I think your last public presentation was in early December, and your results seemed even more positive than your tone back then. So it seems like maybe you picked up momentum as the quarter progressed. And then I just had a separate question on the issue of lead cables. I was wondering if you would comment on the latest media report that the EPA has conducted its own testing near some of your lead sheet cables that have shown lead levels above the EPA standard for safety. You know, any sense as to whether these reports are accurate? And if so, you know, how are you thinking about the potential impact at this point around this issue?
Hans Vestberg: Thank you. Yeah. Thank you, Bryan. Let me start with the market in the fourth quarter. We don't know. I mean, the others haven't reported.
Hans Vestberg: We only know that we have performed really well. But that has been – it's not the one-quarter phenomenon. If you think about the second quarter, the third quarter, even in the first quarter, we were sequentially improving all the time.
Hans Vestberg: And we have done that in a very disciplined way with a lot of actions. And that we need to keep up. So, and then the comment on how the quarter turned out.
Hans Vestberg: So you probably talk about consumers more than anything else. I think we're solid through the quarter. There was nothing sort of different during the month in the quarter.
Hans Vestberg: We were solid through the quarter, doing well in performance. On the lead, as I said before, we take that very seriously. I cannot comment on what the media are doing.
Hans Vestberg: We work with all the agencies to see that we are following this up, and we have revealed all the information we have, so we don't have any more.
Hans Vestberg: We have also disclosed how much lead cable we have in the network, which is very little. But again, we take it seriously and work with all the agencies. Okay, thank you.
Bryan D. Kraft: Yeah, thanks, Bryan. Hey, Brad, we have time for one more question. Your last question will come from Walter Piecyk of Light Shed. Your line is open. Thanks. Hey, Hans, this is, I apologize, probably the fourth time you're coming back to the gross ad question.
Walter Piecyk: But I think earlier you made mention of kind of the change in structure from nationalization to localization. I think that was something that Sam Path has kind of, You know, stated is one of the specific things and probably something that maybe could be more sustainable than just a change in a rate plan that obviously could be replicated or just addresses the market. So just a couple questions on that. First, if you think about kind of the ramp in the fourth quarter, I know this is kind of a soft question, but the impact of localization and that change in the structure of the sales organization versus my plan, which had a larger impact. And then I guess more importantly, you know, the sustainability, meaning that, yeah, we typically do see sequential growth seasonally around this time of year, obviously more pronounced this year than in previous years. But are we going to see even more sequential growth or, you know, more abnormal growth in the first half of the year as some of the implementation of that localization continues, or have we largely already seen that impact as we go into 2024? Thank you. Hey, Walt.
Hans Vestberg: I think that was a good question. So, remember, it started with the network. As the C-band is sort of rolling out in different zip codes all the time, we are engaging locally. The same we did with the consumer group, to be much more local, to be able to do local marketing, cater for the local market, and have local flavors in our marketing. We worked with a sports league like NFL and the teams in different markets to see that happen. So, of course, I'm going to attribute part of our growth during the year to decentralization. But we have just got started to see that we have that team in place.
Hans Vestberg: And Sampat and the team are working with them, with these market precedents, to make it. But it's also a sign of where the market is going. You need to be local, and you need to be on the ground in the different societies in order to perform and be acknowledged.
Hans Vestberg: And Verizon is most visible on all those grounds. And now we're taking the next step with our structure. So, very pleased with what I've seen so far, but more to be done. Yeah, well, just to add on to what Hans said, you know, the regional structure is a lot closer to the customer. And we've run the business this way for many, many years. And we can do things like different promos for different markets and, you know, local resources and decision making, and the localization offset some of the price increases as well.
Tony Skiatis: So, you know, we feel really good about where we're heading, especially with the tier two and tier three rollouts with C-band and the opportunity that provides. Tony, can you also remind us when the board considers share repurchase as it relates to leverage? And I think the leverage that you mentioned earlier in the call excludes the unsecured debt because you were referencing a 2.6 number. So assuming we're basing it off the 2.6 number, I think your long-term target was 2.0. So clearly, you wouldn't let it go below 2.0 before you start buying stock back. But is there any consideration under 2.5 where the board starts to consider share repurchase? Thank you. Thank you, Walt. I think this is something that we're being very disciplined about. Our capital allocation priority is clear. Number one, money for the business, basically our CAPEX. Number two, continue to put the board in a place where they can continue to increase our dividend. And number three, paying down debt.
Hans Vestberg: When we come down to 2.25, we have said we will start considering buybacks. But our ultimate long-term goal is to get around 2. So yeah, that's the plan. But, of course, it will depend on where the market is, where the interest rates are, where the capital is, and where our equity is.
Hans Vestberg: But clearly, that's the plan we have right now, and the board is fully tuned into that plan. Thank you. Yeah, thanks, Walt. Brad, back to you. Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation and for using Verizon Conference Services. You may now disconnect.