Good morning, and welcome to the Verizon 4th Quarter 2020 Earnings Conference Call. 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, and welcome to our Q4 earnings conference call. This is Brady Connor, and I'm here with our Chairman and Chief Executive Officer, Hans Vestberg and Matt Ellis, our Chief Financial Officer. As a reminder, our earnings release, financial and operating information and the presentation slides are available on our Investor Relations website. A A replay and transcript of this call will also be made available on our website.
Before we get started, I'd like to draw your attention to our Safe Harbor statement on Slide 2. Information in this presentation contains statements about expected future events and financial results that are forward looking and subject to risks participants and uncertainties. Discussion of factors that may affect future results is contained in Verizon's filings with the SEC, which are available on our website. Participants are in the range of $1,000,000,000 This presentation contains certain non GAAP financial measures. Reconciliations of these non GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website.
The quarterly growth rates disclosed in our presentation slides and during our formal remarks participants are on a year over year basis unless otherwise noted as sequential. As a reminder, we are in the quiet period for Spectrum Auction 107, We will not be able to comment on our mid band spectrum holdings or strategy at this time. Now let's take a look at consolidated earnings for the Q4 and full year. Participants are in the Q4. We reported earnings of $1.11 per share, resulting in full year earnings of $4.30 per share participants are on a GAAP basis.
Reported 4th quarter earnings include a pre tax loss from special items of approximately $523,000,000 participants are in the range of $404,000,000 primarily related to severance, including voluntary separations under our existing plans and the annual mark to market for our pension and OPEB liabilities as well as a net loss of $119,000,000 are primarily related to the disposition of the HuffPost Business. Excluding the effects of these special items, adjusted earnings per share was $1.21 in the Q4 and $4.90 for the full year. Let's now move to Slide 4 and take a closer look at our 4th quarter earnings profile. The impact to earnings from the adoption of accounting standards ASC 606 for revenue recognition is illustrated for comparability purposes participants are in the range of
$1,000,000 and reflects a reduction in
the benefit realized due to the deferral of commission expense versus the prior year. We also continue to monitor the ongoing impacts of COVID on our business. The year over year impacts of both ASC 606 participants and COVID were not significant in the 4th quarter. The full year 2020 impacts from ASC 606 participants and COVID were $0.09 and $0.21 respectively, on both a reported and adjusted earnings per share basis. Participants are in the position of ASC 606 to have a significant impact on the comparability of 2021 results for 2020.
Full year adjusted EPS growth of 1.9% illustrated on the earnings waterfall slide reflects the strong underlying performance of the With that, I'll now turn the call over to Hans to take you through a recap of 2020.
Thank you, Brady, participants And happy New Year to all of you. First of all, 2020 was a challenging year, and I can only say participants are in the process of providing a very strong financial environment. And we supported our customers, our employees and the society in a way that I've never seen before. So all in all, a great year. At the same time, We executed well on our strategy and saw that we had really good financial performance as well.
When it comes to our 2020 strategic priorities, let me just walk through the execution of them. First of all, strengthening and grow the core business. Participants. I'm really proud to announce that we continue to have the best network in the nation. We just got for the 15th time the overall best network with route metrics won all 7 different categories.
That includes 5 gs, Which is so important to us that we continue to have that lead. I'm also happy to announce that we won for the 26th consecutive time the J. D. Powers participants are in the line with our network and technology team, how they have been building a network and how we continue to lead these markets. Participants When it comes to the customer innovation, you have seen us working with our customers to give them richer offering And also even better performance of the network.
This year with Disney plus Discovery plus also adding in the iPhone 5 from participants Apple has, of course, supported a lot of our innovation that we're doing in the Verizon Consumer Group. And we see a great participants are in the process of the integration of our customers to unlimited and to the premium unlimited. Finally, you can see also that Verizon Business Group has participants to see that we are putting a foundation to be even stronger for the future, had good growth in the wireless And also in some areas like the public sector, very good performance and also adding a lot of new customers on the enterprise side. Participants When it comes to us leveraging the assets to drive new growth, the commitments we did in the February 2020 when it comes to 5 gs were all met All exceeded. I'm extremely happy with that.
We now have 64 ultra wideband cities. We have more than 10 cities On our home 5 gs ultra wideband, we have 10 mobile edge compute centers public with Amazon. All in all, we deployed more than 5 times more ultra wideband sites during 2020, and we launched participants are now in the nationwide 5 gs that now is covering 230,000,000 POPs in 2,700 Cities. On the financial side, a strong year ended where we had more than 2% growth in the wireless service revenue. We also have growth on our EPS in the 4th quarter over 7%.
We had an operational cash flow for the full year of US41.8 billion dollars which is a growth of 17%. Participants have a very strong year that put us in a good position when we go into 2021. And finally, we have a really large focus on have to include all our 4 stakeholders in the work we're doing, and I'm really proud of the cities and Verizon that we launched during last year, which is a great way for us to see that the society aspect is part of our strategy, participants are in the same period. Well, of course, our focus on being carbon neutral is very important and the second green bond was launched at participants are in the second half of twenty twenty. So all in all, I have to say, it was a very different year, participants are participating in the same time as we pivoted and supported all our stakeholders.
At the November sell side event, I presented the 5 vectors of growth. Those are the vectors that is based On our strategy of network as a service, those are also the enablers for us to get to GDP plus We have great traction on them and we also have done quite a lot in 2020, all the way from the 5 gs adoption to the customer differentiation that I talked a lot about, participants are in the same period. The new markets that we're addressing still pending the acquisition of TracFone, but we have other segments we are addressing As well as the next generation business to business application based on our unique mobile edge compute offering that we have with Amazon, also now with Microsoft and many other partners. And finally, the network monetization with our MVNO partners, participants are in the range of the 2nd quarter. The Verizon Intelligent Edge Network that we outlined some 3 years ago and giving us the opportunity to have great execution in the future.
With that, I would like to hand over to Matt to go through the financials in a little bit more detail.
Thank you, Hans, and good morning, everyone. Participants are ready to take questions. I would like to start by saying how proud I am of the Verizon team and the results we delivered in 2020. In the 4th quarter, consolidated operating revenue was $34,700,000,000 down 0.2%. Total wireless service revenue growth and strong results in Verizon Media Group were offset by lower wireless equipment revenue and ongoing declines in legacy wireline products.
Adjusted EBITDA for the quarter was $11,700,000,000 as compared to $11,100,000,000 last year, participants are in the range of 5.3% increase driven by service and other revenue growth and disciplined spending. Full year consolidated adjusted EBITDA totaled $47,100,000,000 and adjusted EBITDA margin was 36.7%, 90 basis points higher than last year, participants are participating in the process of executing on our business excellence program has resulted in realized cumulative cash savings of $9,500,000,000 and we are well positioned to achieve our $10,000,000,000 goal participants are participants will create additional savings opportunities beyond the current program. As Brady mentioned, adjusted EPS for the Q4 was $1.21 At the high end of our revised guidance, demonstrating the strength and resilience of our business. Let's now turn to cash flow results on Slide 8. Our cash generation was exceptionally strong in 2020, reflecting our subscription based business model and the quality of our customer base.
Participants are in the range of $1,000,000
This enabled us to continue
to execute in our capital allocation model, investing in our business, increasing our dividend for the 14th straight year participants are in the range of $1,800,000,000 for the year, an increase of $6,000,000,000 from the prior year, driven by continued performance and strength in the business, lower tax payments due to a one time cash tax benefit received earlier in the year As we continue to support traffic growth on our 4 gs LTE network, while expanding the reach and capacity of our 5 gs ultra wideband network And launching our nationwide 5 gs network. As a result, free cash flow for the year was $23,600,000,000 participants are up 32.4% year over year. Throughout the year, we opportunistically diversified our debt portfolio participants have been able to optimize our cost of borrowing and retain a higher level of cash as a result of the pandemic. We exited the quarter with net unsecured debt of 96 $300,000,000 and our net unsecured debt to adjusted EBITDA ratio was approximately 2.0x versus our targeted range participants are in the range of 1.75 times to 2.0 times. We remain committed to our capital allocation model.
Now let's review our operating segment results, participants are in the range of $1,000,000,000. Starting with Consumer on Slide 9. Our competitive position is based on compelling unlimited plans provide choice to consumers, paired with the best devices and attractive promotions, all built on the country's best network. This quarter, we launched our nationwide 5 gs service to coincide with the release of the iPhone 12 lineup, which fully supports our ultra wideband offering, Enabling Verizon customers to utilize the full range of connectivity provided by this iconic device. Partnerships remain a critical component of our value proposition.
We recently added Discovery to our list of existing successful partnerships, which includes Apple and Disney. As the early cohort of Disney Plus customers have come off of the initial free 12 month period, more than 2 thirds have maintained their subscription, volume activity in the quarter was tempered by consumer behavior given rising COVID cases and elevated store closures at limited foot traffic participants are in addition to the retention offers in the market. As a result, the pool of consumer switching carriers was lower than a year ago. 4th quarter phone gross adds were down approximately 24% year over year, relatively consistent with declines experienced in the 3rd quarter. Participants are pleased with the quality of the additions we are attracting as over 90% of new accounts came in on an unlimited plan and over 55% of these accounts participants are in the range of $1,000,000,000.
At quarter end, over 60% of our base was on an unlimited plan with more than 20% of participants are taking a premium plan. Our customer retention remains high with phone churn of 0.76% for the quarter, down 7 basis points from a year ago, contributing to postpaid phone net adds of 163,000. Disconnects related to customers in our Stay Connected program approximately 95% of customers making a payment since entering the program and collection cure rates are in line with our expectations. More than 50% of all customers on the program are current on their payments. December was the final month of service billings for the program and payment activity remains stable, though we will continue to closely monitor payment trends in 2021.
Turning to Fios, participants are in the range of $1,000,000 more than double the Q4 of 2019. Total Fios Internet net additions of 95,000 was the best Q4 we have had since 2014 and reflected strong demand for our gigabit offering as consumers continue to work And learn from home. Cord cutting trends continued, resulting in consumer files video net losses for the quarter of 72,000. Participants are participating in the due to softer volumes in the quarter. For the full year, total consumer revenue decreased 2.8% for $13,600,000,000 a 1.2% increase.
The results reflect the resilience of our business As we recovered from a 2.7% decrease in the 2nd quarter, in the 4th quarter, we delivered ARPU growth of 1.8% year over year, Even as travel pass and other usage fees remain at subdued levels, demonstrating that our tiered approach to unlimited provides a strong foundation for delivering revenue growth. For the full year, consumer wireless service revenue was $53,600,000,000 are relatively flat from 2019 levels. Consumer files revenue totaled $2,800,000,000 participants are in a 2.5% decline from a year ago. Customer credits related to regional sports networks negatively impacted Fios revenue by 4.2% in the quarter and also reduced our content expense. We expect Fios revenue to benefit as growth in the broadband base offsets the impact of the shift from the triple play bundle to standalone service.
Consumer segment EBITDA grew 2.9% to $9,900,000,000 Margins were 41.5% in the quarter, up 160 basis points from last year, participants are participating in the Q4, including headwinds of approximately 30 basis points from the deferral of commission expense. For the full year, EBITDA margins were 45.5%,
participants are
in the range of 120 basis points from the prior year, including an impact of approximately 50 basis points from the deferral of commission expense. Participants are now ready to
begin the Q4.
Now let's move to our business segment on Slide 11. Business wireless trends remained resilient throughout the year participants are in the Q4. The Q4 was no different. Public sector demand remains strong on the success of our distance learning program and support for increased needs of state and local government agencies. Small and medium business trends improved sequentially, while we experienced modest pressures in enterprise.
Business segment fund gross adds for the quarter were down 11% from the prior year due to store closures participants were $8,100,000,000 in the 4th quarter, down slightly year over year. Full year operating revenues of $31,000,000,000 represented a decline of 1.5% from the prior year. Wireless service revenue in the quarter accelerated to 7.1% year over year Looking at wireless service revenue, public sector had a particularly strong quarter and small and medium business growth improved for the 2nd straight quarter, participants are initially benefiting from the transition to a work from home economy. The growth in advanced communication services continues to drive opportunities for the segment. Participants are well positioned to be in
the range of $1,000,000,000. While we are pleased with the revenue performance of the business
segment and exit 2020 with momentum, there are uncertainties around how businesses will perform in 2021 Given the challenges within the macro environment, the elevated demand experienced in public sector and parts of enterprise throughout 2020 could potentially create headwinds to growth in the
participants are encouraged by the strong performance of our
business segment, particularly in the back half of twenty twenty one. Business segment EBITDA margin was 24.6% in the quarter, participants are up 3.90 basis points from the year ago period, reflecting the strength in wireless service revenue and the benefits of our transformation initiatives, participants are now ready to discuss Verizon Media Group. We are very pleased with Verizon Media Group performance. Participants are in the range of $2,300,000,000 up approximately 11% from a year ago, the Q1 of year over year growth since the Yahoo! Acquisition.
Growth in the quarter was fueled by strong advertising trends with demand side platform revenue growing 41% compared to the prior year. Advertising strength came from political, consumer products, technology and retail among other verticals. The 4th quarter also saw continued high consumer engagement in commerce as offline to online shopping behaviors continued through the holiday season participants are on our owned and operated properties. In particular, male e commerce revenue growth was 7 times that of the prior year, Let's now move on to Slide 14 for a quick look at overall wireless performance. Key metrics and financial data of the combined wireless products and services from the consumer and business segments are illustrated on this slide.
Participants are in the range of $0.20 per share. Total wireless service revenue was up 2.2% year over year in the 4th quarter and up 0.7% for the full year. Additional details are provided in the financial and operating information and the supplemental earnings reschedules on our website. Now let's focus on our outlook for 2021 on Slide 15. We are excited to deliver 2021 And 5 gs continues to scale.
This year, we are providing an outlook for service and other revenue, which includes revenues from across all of our businesses, participants are in the range of
$1,000,000 but excludes
wireless equipment revenue given its variability, especially in the current environment. For 2021, we expect Service and other revenue growth of at least 2%, reflecting acceleration of total wireless service and Fios revenue growth as well as continued momentum in Verizon Media, partially offset by ongoing legacy wireline product declines. Included in this outlook is total wireless service revenue growth of at least 3%, driven by our tiered unlimited plans, new customer contributions and ongoing strength in business. For the full year, we expect to see adjusted earnings per share of $5 participants are in the range of $5.15 driven by recurring service and other revenue growth as well as ongoing cost initiatives. We assume no significant year over year impact from below the line items based on the 2021 opening balance sheet.
The adjusted effective tax rate is expected to be in the range of 23% to 25%. Our consolidated capital spend for full year 2021 is expected to be between $17,500,000,000 $18,500,000,000 are consistent with the prior year and within our normal capital intensity range. Our focus of the year includes further expansion of our 5 gs ultra wideband network participants are in new and existing markets, densification of our network to manage future traffic demands and continued deployment of our fiber infrastructure. Our cash flows in 2021 are expected to be driven by higher operating incomes offset by taxes and working capital. Participants are in the range of $1,000,000,000 We anticipate that our cash taxes in 2021 will be higher than in 2020, given expectations for higher pretax income this year participants are onetime $2,200,000,000 cash tax benefit received in the Q2 of 2020.
Working capital was a tailwind in 2020 due to the lower equipment volumes, which we do not expect to repeat in 2021.
With that,
I will turn the call back over to Hans to discuss our 2021 priorities.
Thank you, Matt. Let me review the 2021 priorities based on the 4 pillars of strategic priorities, participants are starting with the core business. And as you heard Matt talking about accelerating the service revenue, I'm pleased that we're guiding for a +3 percent wireless service revenue growth in 2021. That's based on that we will continue to differentiate participants are in the position for customers. We also will continue to invest in our Verizon Business Group to captured that potential we see in the business segment with a new platform that we're developing together with our customers.
Participants When it comes to our 5 gs and investing our business, we have a big year in front of us in 2021. Again, We're going to almost double the amount of 5 gs ultra wideband sites. We're going to have 14,000 new sites coming in doing 2021. That will enable us to continue to increase with plus 20 cities when it comes to 5 gs ultra wideband, And we're also going to add some plus 20 5 gs home cities, at the same time focusing very much on the 5 gs mobile edge compute with 10 more sites when it comes to the public side. And then on the private side, we will scale that network together with the demand that has come as we now are ready, all underpinned with the Verizon Intelligent Edge Network and the fiber that we are deploying.
When it comes to the financial, Matt talked about that we continue to focus on accelerating the earnings per share growth. Participants are now with the guidance of $5,000,000 to $5,000,000,000 earnings per share. The year 2020 solidified our balance sheet participants are in the process of continuing to focus on the cash flow generation. And finally, when it comes to our culture and our purpose, we have very much focused on the customer centricity and the brand strength that we have built in the market that will continue As well as we will have also the citizen Verizon totally included in our overall strategy, see that we are managing all the 4 stakeholders progress one more year on the Verizon 2.0. We're in a great position.
I'm really excited to go into 2021. Participants are in the early part of 2021. We will come back with the exact date in due time. And by that, I would like to hand over to Brady for Q and A.
Thanks, Hans. Brad, we're now ready to take the questions.
Thank you. We will now begin the question and answer your first question comes from Phil Cusick of JPMorgan. Your line is open.
Participants. 2 if I can. First, Hans, can you talk about the strategy of revenue growth from here given the higher promotional environment? Is it important that you grow accounts or can you make the revenue growth on the existing base? And clearly, you're looking for customers to move up to premium unlimited.
Where is that mix And then second, where are we on the fiber build and how should that start to come through in revenue and expense management this year? Participants are ready.
Thank you, Phil. Let me start by the subscriber stand. I mean, first of all, we came into the Q3 already. I mean, participants are in the process. We have our model with the migration of customers giving them a better network and a better experience and that is really how we are managing our base, and we came with a good momentum into the 3rd quarter.
And as you saw in the 4th quarter, participants are in the range of service revenue growing more than 2% as we said also in the guidance. That's participants are in the process of making sure that we are in the process of getting into the market. And as Matt said, We have now more than 60% of our customers on unlimited. But more important, I mean, if you look in the Q4, 90 percent of the net adds took unlimited and out of those, 55 took premium. And the for 3 minutes, of course, where we are adding in the 5 gs, we're adding in Discovery plus Disney plus the way that our that Ronan and his team has worked with this migration path.
And we believe, and as you heard in the guidance that Matt talked about, we believe that we can participants continue that work with our organic service wireless service revenue growth participants are
in the process of the business.
And we have proven the model over the years. And let's also remember, the business side has performed very well when it comes to the wireless account. I mean, We are so strong with the public sector, with the large enterprises on the wireless side. So that is giving us participants are in the range of 2020 1 with the guidance we have of continued service Revenue growth on the wireless side. And we will constantly measure what actions we're taking, but we feel good about it.
Participants When it comes to the fiber question, yes, we continue to roll out fiber. We're probably in the year 3 or 4 right now. We participants I would say the majority or vast majority of all the 5 gs sites, they have our own fiber. We are migrating participants are working on the 4 gs sites, where it's a good return on investment to our own fiber. And over time, we will also open up with opportunities for resend To enterprise customers and wholesale, so I think that we are seeing that benefit already on the 5 gs build because we are using our own fiber.
To get the full impact, we also have a couple of years left in order to have it in all the areas. But we have come far away on the fiber build, and we will continue to do it where it makes sense for the return on investment. So we feel really good about that, and that's part of our Verizon Intelligent Edge network.
Participants are ready for the next question.
Thank you. The next question comes from Brett Feldman of Goldman Sachs. Your line is
open. Thanks for taking the question. I believe you called out in the release that COVID ended up being for $0.02 benefit in the quarter. I imagine that was probably a mix of things that were good and bad. I was hoping you maybe could give us a little bit of insight into that.
And then, the EPS guidance that you gave for this year, what are you assuming about the COVID impacts over the course of this year? If you could give us any insight on how that breaks out? And then also one last question on guidance. Does that factor in any potential future spectrum purposes? Or does it just reflect portfolio structure you have today.
Thanks.
I can start with the last question and Matt can come back to the first. So when it comes to our guidance for participants in 2021. Of course, there are uncertainties of the pandemic and so on, participants But some things we know, I mean, the roaming charges will continue to be a headwind. We also think that as the pandemic and economic recoveries is coming back, probably latter part of 2021. The public sector will not have an equally strong year as they had in 2020.
Participants are in the same period. We also believe the SMB will continue to
be subdued and have
a challenge in 2021. And as we saw during the full year, the switch pool has been lower due to the traffic in the stores, etcetera. So that's where factored in. Participants But on the other hand, we have line of sight of what we're doing because we're executing on a strategy participants are in the same store. When it comes to migration of our customers, what we're doing in Verizon Business Group and also Verizon Media Group.
As Matt said, I mean, they were now, for the first have a year on year growth with 11%. All in all, that is giving us the confidence that we can live up to this guidance. But there are some uncertainties and there are some headwinds from COVID. But we think that with those assumptions we have, we can actually do this. And this is a continued work with the EPS growth and acceleration that we have talked about ready for so many years right now, and we continue to show that we can do it with the assets we have and how we're executing.
Matt?
Yes. Thanks Hans. So Brett, just in summary on the COVID assumption and the EPS guidance, I think I'd say while certainly some level of pressures will continue to exist on the business throughout the year. I would say it's we're not overly pessimistic, but we're not overly optimistic either. We assumes some level of pressures that you saw from the second half of the year, our ability to still execute within that type of environment.
Participants are in the Q4. In terms of the Q4, as you say, there was actually the COVID impact was actually a $0.02 benefit. And what you saw there participants were in the quarter. There was a couple of one timers, but primarily it was a case of the revenue pressures we saw declining are significantly hit by COVID impacts earlier in the pandemic, but certainly no impact in 4Q as we recorded that 11% revenue growth there. So, those revenue some of the revenue headwinds moderated in the 4th quarter.
The expense benefits continued. That's why you saw the $0.02 net benefit, which actually completely offsets the $0.02 headwind from 606. If you kind of think about in the Q4, 606 and COVID having no net impact on the results, and that $1.21 stands on its own, the 7% increase on a year over year basis.
Thank you.
All right. Thanks, Brett. Brad, we're ready for the next question.
Thank you. Your next question comes from Simon Flannery of Morgan Stanley. Sir, your line is open.
Thank you. Good morning. Hans, I wonder if you could talk about 5 gs monetization in 2021. You mentioned the expansion of the network, the ultra wideband network, more 5 gs home locations, more mobile edge compute. So can you just take us through both on the consumer side, particularly 5 gs Home and on the B2B side, what we should be looking for and what you're kind of including in your forecasts for 2021?
Yes, absolutely. No, we're excited about the 5 gs in 2021. I mean, on the mobility excited to be here. We're already seeing monetization happening. I mean, in the Q4, with so many customers taking the premium And going for unlimited, that's sort of where we have our sweet spot with the 5 gs.
And of course, participants with the Apple iPhone right now in 5 gs, that has now kicked off that. So that you will see through the year when it comes to participants are in the same period. When it comes to 5 gs Home, we have very solid progress in 2020, came out with this new CPE. We added some 12 cities now with 5 gs Home with NR technology, and And our plan is doing 20 plus markets more in 2021. So now we're starting to get a solid foundation for the 5 gs Home.
Alper? And as you heard in my remarks, I mean, we're doubling the amount of sites almost in 2021. So we're now getting to a very, very participants are in the position there. But I said before, on the Alta Wideband build, we're building it mainly in the participants are in the beginning. So we cover less of houses or potential is in the beginning.
But as these continue right now, we're capturing more and more. So I'm really excited. We also know that the CPE is really good. So And the self install is working well. So we're looking forward to seeing that happening over the year more and more.
On the 5 gs Mobile Edge Compute, participants are in the business side. And we are not expecting that will be any significant revenues in the 2021, but You're going to see a lot of customers signing up for the 5 gs Mobile Edge Compute, both the private and the public in 2021 in order for us to have a very solid base going into 2022. So a lot of excitement around 5 gs. I think we have built it absolutely right. We have an opportunity in front of us that we have been working on for a couple of years right now.
So I'm happy with my sales team. I'm happy with the technology team, participants. And we have a big year in front of us.
Great. Thank you.
Yes. Thanks, Simon. Brad, we're ready for the next question.
Thank you. The next question is from John Hodulik of UBS. Sir, your line is open.
Great. Thanks guys. I got 3 quick ones. First, participants are in the
range of 3%
plus service revenue growth. Can you give us a sense in terms of whether that's weighted more towards subs or ARPA improvement? Obviously, you guys in your commentary talked about some of the headwinds to the sub growth. I'm just wondering if you guys think you can maintain sub growth as you book through the year. Participants.
That's number 1. Number 2, just any thoughts on the ability to continue to drive margin improvement in the business, given that considering you're close to achieving the $10,000,000,000 in savings. And then lastly, sort of a follow-up to Brett's question. Is the CapEx guide that we've heard, Is that something that could be revised during the year if the circumstances change? Thanks.
Let me start. I mean, on the 3% growth. I think we have our strategy when it comes to how to grow it with the migration participants and all of that. And as always, the team is validating how to make offerings, if we should be more aggressive or not, but always think about doing long term positive impact for our shareholders financially. And you have seen us now working for the last two and a half years since we We are doing the right things in order to make a long term impact positively for shareholders and for our customers.
And participants are in the participants are in the position of unlimited with the best network and adding in also new value added service, everything from Disney plus to Discovery plus participants Apple Music and it might be more coming up in the year as well. So I'm confident that you guys have that in the portfolio. And as you heard about the participants are in the same store. Disney Plus, I think it's just unheard of how we can help the direct to consumers. I mean, 2 thirds are signing up more than 2 thirds are signing up continue the service of the 1 year.
I think that is something standing out. On the EBITDA, I will Matt will come back, Atul. But I can say that we continued with efficiency, and it's a reason why we are giving a guidance that we will participants will be able to grow the EPS again, and the majority or all of it is basically above the line, as Matt said. So this is operational improvements And improvements as we are growing our top line. Again, we have proven the model, the 5 vectors of growth, and now we're in the middle of executing.
And finally on CapEx, This is what we need to do right now. We the technology team has all the means to have to execute on a strategy with assets we have today. The only thing I can say, as I said, I'm not sure, 100 times before. We will only increase CapEx if we find something that has a really good return on investment, participants are in the line with us. And then we'll come back and talk about it.
Right now, we have everything that we need to execute the plans that we have in front of us.
Participants Hey, John. So back to your couple of questions around the guide. As you think about the 3% service revenue, it's really a combination of subs participants obviously talked through all of the things that will drive the ARPA side of the equation. But we certainly do expect subs growth, account growth and net ag growth is important to our business as well. We will do that in a disciplined way.
Participants are in the range of $1,000,000,000.
We're not going to chase unprofitable growth, but you should
expect to see volume growth in the business as well as ARPA growth. And then the margin improvement, Cost savings, as you mentioned, we're close to the achieving the $10,000,000,000 program well ahead of the end of 2021 timeline that we put in participants are in place. But just because we hit that doesn't mean we'll stop. There's significant opportunities participants continue to make our business more efficient. The teams are very focused on those.
And improvement in EBITDA margin dollars, if we have equipment revenue increase this year, which we would certainly be glad to see participants are in the range of $1,000,000 an indication of the overall economic activity picking up, you'd see an impact of that in the EBIT margin. So You could have EBIT dollars grow, but margins not grow as much just because of the impact on the numerator and denominator from the equipment revenue. But participants We're certainly very much focused on the dollar side of that equation and excited with the guide we have for the year.
Great. Thanks, Matt.
Participants. The next question comes from David Barton of Bank of America. Your line is open.
Participants. Hans, I guess the first question for you just on the strategy side with the sale of the HuffPost, Is this the beginning of a dismantling of the Verizon Media business? Is it on the block? What is the game plan For that unit, as we think longer term for Verizon. And then I guess the second question would be for Matt.
Matt, you called out that 2H21 might have some tough comps for the business side of the business. Could you kind of elaborate a little bit on what that might be and what the numbers might look like? Thank you.
Thank you. Participants On the Verizon Media Group, I just want to remember you that we started this journey somewhere in 20 for 2018, resetting the overall strategy of Horizon Media Group, we started with that. We started to take out cost. We changed the product portfolio. We went into a very clear brand value to trust and privacy.
The team has just done an outstanding job. I mean, they have been bringing this from sort of going down with a decreasing growth of 15% to 20% per quarter and now they're turning around with extremely sharp products, including also Consolidating some I'm not sure if it was 10 or 15 different ad tech platforms to 1. I think it's a great we have put them in a position participants are very happy with. So I'm looking forward how these guys will execute, and we are now in the position where I wanted it to be.
And then, David, on your question on the VBG volumes, so certainly as you think about, what we've seen this year, country. So, I would actually be very happy if we saw some pressure on those volumes in the second half of the year. That would mean good things were happening participants are very supportive of our consumer business, very supportive of our SMB businesses as well. So participants Certainly, it's part of some of the uncertainty that exists as we think about the year. But just wanted to call out the fact that participants
are in the same period. If we see the improvements we expect,
we may see some impact there on the public sector side of our for Horizon Business Group volumes, but as I say, I think that would be more than offset by other parts of the business. So what you've seen and what we expect in 2021 is a continuation of what you in 2020 is that as we have so many different parts of the business, irrespective how the macro environment plays out, we can put together participants have very strong consolidated results.
Thanks, guys.
Yes. Thanks, Dave. Brad, we're ready for the next question.
Participants are ready to take questions.
Thank you. The next question comes from Craig Moffett of MoffettNathanson. Your line is open.
Yes, hi. I wonder if we could just talk about the participants are in a competitive environment in wireless for a moment. Your gross additions remain, especially in consumer, but across consumer and business, Way down, your churn rate remains very good, and your sort of ARPU shows signs of improving. That's a sort of a different story than what we've seen for the last few years, which it sort of speaks to participants are in the range of competitive intensity, but clearly a weakening of your ability to acquire new in the 5 gs era as we particularly now that more and more of the handsets that are being sold are 5 gs handsets.
Participants Thank you. First of all, I think the competitive landscape is always there and competition is always equal. I participants. We just have a little bit different strategy. I mean, first of all, quality net adds is for us very, very important.
And as you can see, we are adding these participants are very important net debt. We want quality customers that likes our network, that likes our offerings and our experience. And if you look at what we have done the last 2.5 years with our migration story, that's exactly what we have done, and that's what you see in impact in the 4th quarter. We're growing our service revenue as well as the guidance for next year. So we are confident with the the 5 growth vectors we have to get to GDP plus And with the guidance that Matt gave with or we gave with the plus 3% on the wireless service revenue, I think we have all the confidence in the model we have and how we'll work with.
But it's also true that the switcher pool during 2020 in the 4th quarter was lower due to COVID, less traffic and all of that. So but all in all, we are very pleased with the high quality net additions participants are getting and that we can create growth with that and continue so on. Matt?
Yes. Thanks, Hans. Craig, I think the retention side of the business is performing very, very well. And we're doing that through the quality of the network, the quality of the customer experienced and not having to do anything additional to drive that type of retention numbers that you
Thanks. And if I could just squeeze in one more question, if I could, because and sorry to change topics, but your video strategy seems to be now quite different In wireline and wireless, you're clearly with Disney and Discovery, you're sort of playing the in the Netherlands. I wonder if it raises any questions about for Fios. Does it make sense to stay in the video business as you currently have it where you're still selling a direct package? Or would it make sense to move to a similar strategy for the wireline side where you sort of offer more third party aggregators, if you will, across your network.
Participants. Thank you, Craig. No, first of all, you're absolutely right. On the wireless side, our D2C strategy is great. We have a platform that nobody else when it comes to distribution brand and network and we can cope with this.
We're not going to have 100 different type of offerings, but the Discovery plus the Disney plus participants They are sort of super A brands that we want to work with or Apple Music. We will look for more of these to see that they're fitting into our customer base, participants That they like it and are willing both to upgrade and migrate. So we'll continue with that. On the Fios side, Of course, we will continue with the video right now, but you have seen us also starting with mix and match, starting to shop up this because ultimately, I want our participants have choices. And I want them to choose.
If they want the DTC solution or if they want linear or they want over the top, should be able to choose it. And look at the numbers in the Q4 again. We continue to grow our Fios Internet customers And we have a decline in the video customers. That's good for us. I mean financially, but ultimately, it is to meet our customers' needs.
And I think the whole setup that we did in Verizon 2.0 is just catered for us to do things that we never thought about before. We have a consumer division thinking about how are we now delivering to consumers. And that's what you see in the numbers. That's what you see in the numbers that we have. We have the same in Verizon Business Group.
They are thinking totally different than we have done before. And we still have more to do with platforms and think to be even more are scalable and be able to bring more to the bottom line. But I have to say, I'm pleased and I hope that you guys what you see are pleased as well. I mean, the strategy participants are working. We have the 5 vectors of growth.
We're going to 2021. We have proof points on all those 5, including the video strategy you asked about.
Participants. Thank you. Yes. Thanks, Craig. Brad, we're ready for the next question.
Thank you. The next question comes from Michael Rollins of Citi. Your line is open.
Participants. Thanks and good morning. Two questions if I could. First, if you look at the improvement in postpaid churn participants are in the range of $1,000,000,000 year over year. Can you unpack, what portion of that might be coming from the pandemic and the lower switcher pool Versus what's coming from the Verizon initiatives on the network strategy, the tiering and content bundling that you're doing or any other factors that you think may be improving retention?
And then secondly, On the wireline business, is there at some point down the road a step function opportunity to take margins up, Especially as you've continued to fiberize the local footprint. Thanks.
Thank you. I will start. I will let Matt make some comments as well. But all participants On the post page, Sharon, I think that we are just having a great moment with our customers. They love our network and working the performance we have and the additions we're doing with 5 gs and 5 gs Ultra Wideband.
At the same time, our offerings are so distinct and different than anybody else in the market where they can go to the unlimited premium together with Discovery Plus or Disney Plus participants are in the market. I think nobody else has those type of things in the market. And our partners, at least if you ask them, I think you should, are very happy and pleased on how we can deal with this. We are happy with it, both from a retention, but also from a bottom line participants are making money on this, which is the whole idea with the network of service that we're building on the Verizon Intelligent Edge participants are working. On the wireline side, I think the whole idea of the Verizon Business Group is really to see that we are working these 3 year over year.
This is nothing that you fix in a month or a quarter or 2. This is things that we need to invest in a billing system, participants are in the per group of our margins in the Verizon Business Group. And I think that if you look at 2020, I mean, it was a good performance of them, still doing investments in order to get where we want to get over time. And then we add to that new opportunities participants Like 5 gs Mobile Edge Compute. Matt?
Yes. So just back on the postpaid churn, Mike, for a second. Participants are in the range of $1,000,000. Certainly, there is a pandemic contribution, but as Hans mentioned, a lot of Verizon specific pieces too. Participants I'd also point out that the 4th quarter share number included the impact.
If you think about the Stay Connected customers, participants are going to be in the process of the 2020. And so you had a positive benefit from that in Q2 and 3Q, a little bit of a catch up in 4Q, but even with that, a very
participants are ready. Thank you. The next question comes from Doug Mitchelson of Credit Suisse. Your line is open.
Thanks so much. Hans, participants. I was hoping you reflect back on the arrival of 5 gs in the United States. And the prompt is, I think a lot of people thought the iPhone 12 being 5 gs and having all your bands in it participants would start a bit of a super cycle or not a bit of 1, but a super cycle for consumers adopting 5 gs in the United States. I'm just curious how much of it sort of not happening in that way is due to the pandemic and the lack of getting people to retail versus the lack of applications that would really just sort of delight consumers and get them to upgrade and how you think that's going to evolve over the next year or 2 or 3, is it going to be sort of a slow walk or is there something exciting around the quarter?
And then, for Matt, I'm just curious, beyond working capital, any other free cash flow swing factors for 2021? And is there any way to size or quantify
talk about devices and what's happening with the upgrades and so on. I mean, remember also that the Apple 5 gs phone came out, participants I would say late in Q4, that's when this all started. At the same time, as we had the pandemic, still, I would say we are very pleased what we have seen with our participants are migrating to 5 gs. Remember, we have a fair share or a big share of Apple users in our base. So I think that this is a pretty normal, maybe some little bit subdued, but it's very normal upgrade cycle that we will see.
Participants are getting better and better. I mean, that's what's happening. I mean, we are fortifying our network. We're improving the performance constantly. I remember when I talked about ultra wideband Reaching maybe 1 gigabit per second.
Now we're up to 4, 5. So there's so much more to do. And the same goes for our nationwide, improving all the time, performance better. So I think that is coming together as the accessibility to phones are coming out much more and all the main brands have a 5 gs phone and all of them with ultra wideband. I think that we will see that continuing into 2021 2022.
But there are longer cycles today when it comes to customers migrating to a new phone. They're very attached to it. But I think this is no different than 4 gs cycle. I think we actually are This is going faster than the 4 gs cycle. It's just that our memories are so short, so we don't remember that.
But clearly, this is participants are equal to better than what we saw on the 4 gs cycle that happened some 10 years ago, which I refer to myself when I talk about my memory. So nobody else. Okay, Matt?
Thanks, Hans. So on the cash flow question, Doug. So participants are in the range of $1,000,000,000. When you talk about the swing factors, obviously, it starts with higher earnings for the year. Above the line earnings will be obviously participants are in the cash flow for 2021.
In terms of things that potentially go the other way from a cash flow standpoint, participants are in the range of $2,200,000,000 participants will be a year over year difference in the cash flow. And then working capital, as you say, the biggest side in working capital is going to be in the receivable contracts with customers we're doing goes down as well. So even if we don't see an uptick in volumes this year, if they're just flat year over year, you have the removal of that tailwind from last year. So all in all, you're going to see the increase from higher earnings with some offsets from cash taxes and hopefully on the equipment receivable side are going to be the key factors in there.
All right. Thank you, both.
Yes. Thanks, Doug. Hey, Brad, we're ready for the next question.
Thank you. The next question comes from Peter Cipino of Bernstein. Your line is open.
Hey, good morning. I wondered if you could discuss the service revenue outlook and specifically within consumer, The incremental margin characteristics of the service revenue growth that you expect, how Do you expect that revenue to be any more or less profitable than a normal level of service revenue?
Participants.
I think that was outlined the guidance for 2021. We are looking for profitable growth, And that is how Verizon has worked as long as I recall. Now I haven't been here in all my life. But we work with profitable growth, and that is in the consumer group as well. We will see that we have the best offers for our customers, and we will manage our P and L at the same time.
And participants are ready to
take questions. We will be
aggressive if it's needed to get long term effects. But as you can see from the guidance, it's a profitable growth we're looking for. We should be able participants will be able to grow as well as making that a profitable growth and that's in the guidance.
Yes. So Peter, I think that's exactly it. If participants are in the range of $1,000,000 service revenue guide is going to drive is driving the EPS growth participants in the guide as well. So certainly, it's profitable growth. In terms of comparing it to historical incremental revenue, I think there is obviously different components all the time, but absolutely everything that we're doing to step customers up from a revenue standpoint participants also create incremental lifetime value with those customers.
So you should expect that to be a continuation of how we approach the marketplace that participants are in a way that creates significant economic value for us over the long term as we provide best in class experiences for those customers, nothing changes there in our mindset.
That's a great explanation. Thanks. Yes. Thanks, Peter. Hey, Brad, we've got time for one more question.
Let's do one more if we have somebody on the line.
Thank you, sir. The last question comes from Colby Synesael of Cowen. Your line is open.
Great. Thank you. Just want to circle back on CapEx for a moment, I feel like messaging earlier in the year was that CapEx in 2021 would be up. And if you look at Street expectations, participants are in the range of $1,000,000,000. So I'm just trying to get a sense what might have changed participants are in the range of $1,000,000 to $1,000,000 to $1,000,000,000 Secondly, Biden is proposing increasing the corporate tax rate to 28%.
I'm curious how you think about that and whether that would have a huge impact on free cash flow and dividend coverage or if you think that there will be offsets participants are in the range of $1,000,000,000. And then just as a housekeeping, is TracFone included in your 2021 guidance? Thank you.
Yes. So thanks, Colby. Maybe I'll go in reverse order that. While we expect TracFone to close participants are in the second half of the year. Our guidance is doesn't assume any significant impact on the EPS participants are in the range of
$1,000,000 during the year,
but we'll update that if necessary during the year. Corporate tax is our assumption, as you heard in the guide, 23% to 25%. That's where we've been the last few years. Participants are in the same position. Obviously, we do our outlook based off of what is on the legislative books, and so we do it based on what's there right now.
We look participants are in the business going forward. We'll obviously talk about that at the appropriate time. But we're very confident in the business. Look, We had good dividend coverage when we had a much higher tax rate not too many years ago. So, while we certainly believe that the current rate participants have been very helpful in job creation and economic growth creation.
We're certainly very comfortable with how our business is set up as the administration is looking at different things. And in terms of CapEx, I think what you're seeing is a very efficient capital deployment model within the company, that's why you see a guide that's in line year over year as we continue to do all of the things that we've done, whether that be on LTE, the 5 gs build. You heard Hans talk about our goals for the ultra wideband build this year continue in the fiber build out. And so I think the team has got a very good momentum going there participants are in the same store. As I've got more into those things, the efficiencies continue.
That's why you see the guide where it is.
Participants are ready.
Yes. Thanks, Colby. Let me hand it back over to you, Brad, and we'll close-up the call.
Ladies and gentlemen, this does conclude the conference call for today. Thank you for your participation and for using Verizon Conference Services. You may now disconnect.