Morning, everyone. We're ready to start our first session for the day. I'm excited to introduce Frank Boulben, who's the Chief Revenue Officer for Verizon Consumer. Welcome, Frank.
Morning, Bryan.
Maybe we could start off with the competitive landscape. What are you seeing in the market in terms of industry switching activity, retail store traffic, promotion levels, that sort of thing?
Before we get started, hopefully everybody has read the Safe Harbo r behind me. It's coming. OK. Jumping right in, this Q1 is a bit unusual. We used to say that the holiday season starts earlier every year. Christmas comes early. This year, Christmas is lasting longer. At the beginning of the quarter, when we drop out of our holiday promotions, our peers did not. We have seen an elevated level of competitive intensity in the quarter. We continue and have a disciplined approach. When we see less demand, we pull out of promotion. When we see demand picking up, like in March, we come back with a new promotion. It has been a challenging quarter from a competitive intensity standpoint.
Do you think that there's any softness from an industry standpoint? It's too early to tell that, or is it purely competition that's maybe dictated the environment?
I think it's mostly driven by competition. As far as we're concerned, we have a tough compare year- on- year. Growth stats this quarter are going to be probably soft.
OK. All right. Helpful. What is yours and Sampath's focus this year to build on the successful improvements that you've made over the last 18 months to improve postpaid volumes? Is it gross adds? Is it churn? Is it both? Where do you see the opportunity to drive improvement? And how do you go about doing that?
Yes. In 2024, we returned to phone net add positive, excluding a second number. We grew wireless service revenue at 3.2%. We want to continue with the same formula. On a full-year basis, we want to continue and grow phone net adds in 2025 versus 2024. We have guided for wireless service revenue to grow between 2% and 2.8% at the firm level. Growing phone nets year on year is our priority. How do we achieve it? Number one goal in 2025 will be churn reduction. We have invested in our capability to personalize the treatment of our customer base. That will be a major lever to drive churn down in 2025.
Even if we've made a deliberate decision to have all of our price ups in 2025 at the beginning of the year, to have a full- year, almost a full year impact on service revenue. If we look at the full- year impact of the price ups we did in the back half of 2024 and early 2025, we'll generate more than $1 billion of service revenue in 2025. Obviously, that's creating a headwind pressure on churn early in the year that we are working through. On a full-year basis, we're confident that our churn levels will be down year- on- year.
OK. You're answering this period of increasing promo rolloffs. What are the steps you're taking to ensure high retention of those subscribers? Will this put some upward pressure on churn as these rolloffs occur?
Yes. Exactly three years and a month ago now, we moved to a systematic 36-month device financing. We had, on February 1st of this year, the first three-year anniversary of the first cohort that got onto a 36-month device financing. What we are observing is a change in customer behavior. Customers, when we were in the 24-month device financing regime a few years ago, would tend to have an elevated upgrade rate and an elevated churn at the 24-month mark. What we've observed is a change in customer behavior. They are now, on average, keeping their devices more than 41 months in our customer base. Basically, customers are not in a hurry to upgrade at the end of their device financing. If their device is still in good working condition, they keep it longer.
As we see more customers coming out of contract this year, significantly more than last year, we see them upgrading progressively, not all at once as they get out of contract. On upgrade, we are still expecting middle single-digit growth rate year- on- year, but with a slow start in Q1 and then a progressive ramp up through the rest of the year.
OK. Understood. Sampath had indicated on your fourth quarter earnings call that he expects 8 million-8.5 million industry postpaid phone net ads this year across both business and consumer. What's the confidence level on that estimate? Can you just talk about how you arrived upon it?
Yes. The last couple of years at an industry level, consumer and B2B together, the industry generated more than 9 million net ads in 2024, in 2023, and I think in 2022 as well. If you unpack that 9 million, it's about 80% consumer and 20% business. Within the consumer part, you have 4 to 4.5 million are net prepaid to postpaid migration. Three million is the demographic factors. Kids getting their first smartphone compensated by older people with a smartphone dying. That's about 3 million. We expect the makeup of the 80% that are consumer to go down a little bit, and 8%-8.5% versus the 9% we saw in 2024.
OK. What are you seeing specifically from the cable operators as far as competitive intensity? What are your expectations for Comcast's new offer strategy that they've said is coming?
What we've been observing so far is more of the same from the cable competition. I won't comment specifically on a particular competitor. We don't expect a radical change here from what we are observing in the market. Having operated in Europe, what I can tell you is that when there is a large mobile virtual network operator in the market, you are better off having them on your network. When I look at our position, when we lose retail customers to the cable companies, we retain wholesale revenue. We lose only the spread between retail and wholesale. When they get customers from our competitors, we get wholesale revenue. They take from us less than our fair share of the retail market. Overall, it's significantly accretive for us.
We are in a good position when it comes to the wholesale market and BMSOs on the mobile side. I'll comment on the broadband side later.
OK. Do you think there's maybe a natural level at which cable net ads begin to decelerate? If so, do you think we're anywhere near that at this point?
When I look at the trajectory of the cable companies, what I observe is that the port ratios are flattening year- on- year. Certainly, the growth from a net ad standpoint is decelerating.
Helpful. Shifting gears a little bit, the new administration's policy toward immigration has raised questions over the impact on the industry subscriber pool. How do you expect your postpaid and prepaid businesses to be affected by fewer immigrants entering the U.S. via the southern border and also by potentially increased deportations? Where would this show up in your business, if anywhere?
Yes. Without speculating on what is going exactly to happen, I'd offer two comments. First, we expect very limited impact on the postpaid side, where customers have got to provide some form of identification to get onto a postpaid contract, onto a device financing contract. If there is any impact, we will see it towards the low end of the prepaid market with limited exposure for us. As a matter of fact, immigration started to tail off in the back half of last year. That did not prevent us from returning to phone net positive on the prepaid side. We see some exposure, most likely at the bottom end of the prepaid market, if any.
OK. That's interesting. Yeah. When President Biden's executive order went into place, I think it was in June, you didn't really see any impact in the back half of the year.
No. We've continued to improve our trajectory on the prepaid side.
OK. Over the past few years, we've seen historically low levels of upgrades for Verizon. That trend seems to have bottomed in 2024. You mentioned that you expect upgrades to be up mid-single digit. I guess you addressed it to some degree. Can you just explain the mid-single digit increase, put it into context, and I guess maybe address why it might potentially not be higher than that?
Yes. The first thing at the macro level is we are not witnessing what you call a super cycle in terms of handset cycle. What we see, whatever the ecosystem, is consumers keeping their devices longer. The main driver of upgrade is getting a brand new battery in your smartphone. Less and less reasons to upgrade. We see year after year the average life of a device in our customer base increasing. As I was saying earlier, we've passed now 41 months. That's the most structural driver. The second one is customers getting out of contract. Customers getting out of contract eligible for an upgrade promotion. That cohort is much larger for us in 2025 than 2024.
That's why even if overall customers are upgrading at a slower pace, because we have more customers out of contract, we think we'll be in the mid-single digit upgrade rate on a full-year basis with a slow start in Q1 and a progressive ramp up. Usually, we have significantly more upgrades in the last quarter of the year.
That's interesting. Obviously, longer contract periods have led to lower upgrade rates. It sounds like the biggest factor is actually better batteries, longer battery life.
That's what we observed when we surveyed our customer base.
Right. Interesting. What are the various ways a higher pace of upgrades will impact the business? How do you plan for that?
When customers do upgrade their device, it's an opportunity for us to migrate them onto my Plan, to step them up to a premium plan, sell perks, sell other attached lines, tablet or watch, cross-sell, home broadband if they are eligible. It is an opportunity to upsell and cross-sell when the customer engages with us for that transaction.
Talk about the ARPA outlook a bit. Verizon recently put in place two price ups. How are those received by the base? What is the opportunity that you think you still have to take pricing in the future?
Yeah. The first thing I want to insist on price ups is it's largely accretive. As I said earlier, when you look at the net impact in terms of wireless service revenue of the price ups we did in the last six to seven months, it's more than $1 billion of service revenue. That's net of any churn caused by those price ups. That's a trade-off I would make any day. If I look at the drivers of our ARPA, average revenue per account, beyond the price ups, first, we have step-ups to premium plans. We have now more than 45% of our lines at the end of last year on premium plans. That continues to grow. We drive the step-ups with our tiered promotional strategy. That's one driver. The second driver is non-connectivity product and services that we sell to our customers.
Those amount to about 15% of the ARPA and are growing double digits. I'm talking about the perks in the my Plan construct, our protection services, our cloud storage services, our family services, et cetera.
Do a lot of people buy the cloud storage? I mean, I think a lot of people on Apple use iCloud. I was just curious as to is it more the Android base that's buying it? Or do Apple customers do it as well?
If you look at our perks today, we have three services that offer cloud storage. We have one of the perks is Apple One. We have just added Google One Premium. And we have the Verizon Cloud. We see the three services doing reasonably well. You have customers who want to stay in the same ecosystem, iOS or Android. You have customers who want a storage solution that is independent of their device and their ecosystem. We see a balance between the three options we offer.
Interesting. More than half the base is on my Plan. As you mentioned, it allows you to sell perks. How would you characterize the success of perks overall? What are some of the measurable ways it's affected business performance? How important is this going forward to the execution of the strategy? Yeah. Maybe let me take a step back and come back to the genesis of my Plan. Before my Plan, we used to have, like our peers, inclusions in our wireless plans. We surveyed customers. What they told us is that they wanted control, flexibility, and choice. They wanted to be in command of what is going into their wireless plan. We designed that new structure where you choose your connectivity first, good, better, best, so welcome, plus, and ultimate. Then you decide which additional services you want on top of connectivity. That is what we call perks in the my Plan construct. Those perks come with unique savings. As an example, for streaming services, you can get for $20 five streaming services, the Disney Bundle, Netflix Max. Same savings for Apple One, YouTube Premium, et cetera. We give our customers unique savings.
All those partnerships are exclusive. We have a mix of third-party perks and Verizon perks. Overall, it's a good margin business. The momentum has been very strong. I think by our Investor Day back in October, we said we were already at 7 million perks. By the end of this year, we are on a trajectory for 14 million perks. We see also the fastest adoption of our in-market price plan we've ever witnessed. We have already more than half of the base on my Plan. That's very, very fast.
Yeah. Yeah. Let's move to convergence a little bit. The convergence of home broadband and mobile has obviously been a major point of discussion in the industry. How do you expect convergence to evolve in the U.S.? Just given your experience, how would you compare and contrast that outlook to the path that convergence took in Europe?
Yes. That's a great question. I think I'll talk about two things, convergence the U.S. way and convergence the Verizon way. OK? Convergence the U.S. way, what do I mean by that is if you look at the markets in Europe where convergence destroyed value, that was supply-led. The root cause was the regulatory framework. There was either open access on the broadband side or open access in some cases on the mobile side or both. That dragged industry prices down. Some markets have not recovered. They've reached convergence level in terms of households that have a convergent offer of 70% if you take Spain or France, but at the expense of the value creation in the industry. Convergence the U.S. way is demand-led, not supply-led or regulatory-led.
As far as Verizon is concerned, convergence the Verizon way, what we want is to offer a full solution to our customers. Yes, there is a price advantage. You get a small discount on the broadband side. If you are a premium customer, you get a free perk. You get better customer service. Overall, convergence for us will be accretive. It's leading to higher ARPA, lower churn, whether it's on the fiber side or FWA side. We see more and more customers willing to have all of their services from Verizon. At the end of 2024, we have 16.16% of our mobile customers that have broadband with us. We expect that to continue and grow in the coming years.
I'm going to scooch back a little because I'm being blinded by the sun. Forgive me.
The reflection on the sea.
It's the downside of the view, I guess. Verizon has a robust fixed wireless effort and Fios footprint, the latter of which you're planning to expand to 30 million premises. That's up from 18 million today. How do you utilize these two access technologies in a complementary way to optimize that home broadband and convergence opportunity?
Last year, to start with the data point, on the consumer side, we added more than 1 million broadband households between our fiber product and our FWS. We have strong momentum. We expect that to continue this year. The way we market our broadband service is not technology-based. We market our broadband services under the Verizon Home Internet umbrella. That allows us to do nationwide communication. Based on your eligibility and your exact address, we position a particular technology offering, whether it is fiber, 5G Home, or SUNA, our MDU solution.
When did you go to that strategy of marketing that way, by the way?
That allows us to have a nationwide effort. Whether it's from an advertising standpoint or an offer standpoint or a promotion standpoint, we can have economies of scale in our broadband efforts. That's why you have Verizon Home Internet as a product name. We have the same value proposition. my Home, which is the mirror value proposition of my Plan, is offered both on fiber and fixed wireless access. Same construct, by the way, same pain points of customers. They want to control what's going into their plan. my Home is good, better, best in terms of network speed. I'm simplifying. Then you choose the perks on top.
How are you making decisions regarding where to build fiber to the premises? What led to the decision to begin accelerating fiber build in your current footprint? Does having fixed wireless in the portfolio impact that decision-making process on where to build?
Yeah. We see an opportunity in our ILEC footprint to convert to fiber. The pace of conversion is dictated by the return on investment. That's primarily the only yardstick we use. Together with the Frontier acquisition that we expect to close at the beginning of next year, by 2027, we'll be close to 30 million households in an ILEC footprint. Outside of that ILEC footprint, we'll have our FWA product. We have a two-prong approach to the broadband market, giving us the largest open for sale, if you want, combining both technology and allowing us to offer a complete value proposition, mobile and home, to customers. The best connectivity at home and on the go for a large number of households.
On fixed wireless, management's guided to a bit slower pace in fixed wireless net adds during the first half of the year. Just wanted to understand what's driving that slowdown and then the expected subsequent re-acceleration in the second half of the year.
We had our Broadband Investor Day in October. We've doubled our guidance in terms of fixed wireless access over time from 4 million-5 million to 8 million-9 million. We've guided on between consumer and business between 350,000 and 400,000 broadband additions every quarter. We're going to stay in that ballpark with some seasonal fluctuations from one quarter to the next. If I look at the consumer side, we are confident in our ability to continue and grow both fiber and fixed wireless access. On the fiber side, every year we open new households with fiber connectivity. We penetrate faster. Our go-to-market machine is getting better year after year on new open for sale on the fiber side. On the FWA side, we expand the footprint as we complete the C-band deployment. We are introducing also new products. We just introduced a backup product.
We are about to introduce an MDU solution to continue and diversify the portfolio and increase the penetration.
Can you share some other details around the fixed wireless effort? For example, how many homes are open for sale, where that number is headed? Maybe talk about where you're winning in the market, what types of customers are taking fixed wireless, the high-quality subs, what kind of credit scores do they have? Just any kind of details around that, how much are coming from cable, just to help us kind of understand a little better.
Yes. We finished the year at about 60 million open for sale. We have guided in our Broadband Investor Day that over time that will get to close to 90 million. If I look at the makeup of the fixed wireless access customer base, first is it's largely cross-sold to existing mobile customers. 75% roughly of our fixed wireless access growth ads are taken by existing mobile customers. If I look at their origin, the majority of them are coming from cable. We have also a very healthy premium take rate. We have two products on the fixed wireless access side, 5G Home and 5G Home Plus. The majority of customers are on the premium product.
OK. One thing I was curious about is how does the product perform where it competes with fiber to the home? What do you see from a take rate and penetration perspective there, share perspective?
If I look at customer satisfaction, which I think is the important metric here, we have a very high NPS score for both our FWA product and our fiber product. If you think at the needs of a typical household, they are covered by the FWA product. It competes effectively whether it's with cable or fiber. Because of the cable install base, we see more customers coming from cable to fixed wireless access than from fiber. That's just a function of the relative sizes of those technology customer bases.
OK. How about other competitors' fixed wireless efforts? How have those impacted the Fios base? Have you lost any subs to fixed wireless from other carriers?
Yes. We are certainly losing some. When I look at the performance of Fios, we are posting very strong net adds quarter after quarter. Whatever we are losing from fixed wireless competition in the Fios footprint, we more than compensate by taking customers from the cable competitors that overlap with us in the Fios footprint. We had a good Q4. We had a good 2024 on Fios. We expect that to continue this year.
OK. Shift gears a little bit to the direct-to-device segment, which I think your CTO called out in his blog as one of the key technology trends to watch this year. There's obviously been a lot in the market about it. You've established a relationship with AST Space Mobile for direct-to-device. How important do you think it is to be able to offer satellite broadband and voice coverage to your customers? Any sense for how much of the base would value this and be willing to pay for it? Any kind of thoughts on how you might think about pricing, the pricing construct for it?
First of all, we have a great network. We have great coverage. We have less white spots than some of our competitors, so less of a need for complementary solutions. Having said that, there are some use cases where direct from satellite to smartphone will be useful. When we surveyed our customers, we see that there is demand for it, but it's very niche. Our approach there has been to offer, in partnership with Skylo and then AST, a complete solution. Emergency SMS, bidirectional SMS, and then voice and data, but with a free layer of service that customers do expect. Only when we have a full solution, we'll have a paid-for service. We do not think, based on all the customer service we do, that it's a reason to switch from one provider to another. It's a complementary service.
It's an add-on, but not a reason to switch.
All right. Staying on the topic, T-Mobile did something interesting when they launched the data for Starlink by inviting Verizon and AT&T customers to join the data. Just wondering how you think about the potential churn threat there as they go to commercial launch because Verizon and AT&T customers will then be charged $20 per month if they want to keep that service. Secondly, customers presumably provide their contact information to T-Mobile when they sign up. It allows T-Mobile to target them with direct offers. Just wondering how you're thinking about that competitive threat. Are you able to tell how many Verizon customers opted into the data so far?
No. I'm not able to tell the exact number. What I can tell you is that we've seen insignificant volumes of our customers inquiring about satellite, whether it's in customer service or in our stores. The second comment, the pricing offered by our competitor seems a bit rich given the low demand for that service. Again, I don't expect it to be a driver of switchers.
Yeah. Have you seen many people using the Globalstar option on Apple phones in your base? I mean, it doesn't seem like it's ever really been marketed, but it's available.
It's been used mostly in emergency situations, meaning it's very rare. As I said, we don't see massive usage there. It's more a peace of mind type of feature that some customers do value.
That's text only. Do you see the demand, though, being fundamentally different when you move to a broadband and voice solution?
We'll expect that there will be a bit more demand, but again, niche, probably significantly smaller than international roaming, as an example.
Right. OK. You're expecting prepaid to return to positive revenue growth in 2025. Can you talk about that journey you've been on in prepaid over the past few years, including the TracFone acquisition, steps you've taken to turn the business around, and what's the algorithm behind that turnaround, so to speak?
It's been a great success story. We closed the acquisition of TracFone in November 2021, if I'm not mistaken. Our team has been very busy since. What did we do? TracFone was an MVNO. TracFone was not able to compete at the high end of the prepaid market. Their unlimited price points were not competitive. What we've done is we've repositioned all the brands and all the value propositions in the TracFone portfolio. Now each brand has its target segment, its primary channels, and we've revamped all the value propositions. That is the first thing we've done. Second, we wanted to grow a prepaid brand with its own branded retail stores. That's what we are doing with Total Wireless. We've done it in record time.
We grew from zero to 700 stores by the end of 2023. By the end of last year, we were at 1,200. By the end of this year, we'll be around 2,000. Total Wireless is growing fast in attacking the segment of prepaid customers that want to do business in a branded retail store. We've also accelerated the momentum of our digital-only prepaid brand, Visible, and repositioned our exclusive brands at Walmart. That is, if you want, on the front book. In the back end, we've invested in the tech stack. We've developed our base management capabilities to improve churn. We finished 2024 phone net add positive on prepaid, excluding SafeLink. In 2025, we'll be better year- on- year on phone nets. We'll return to revenue growth year- on- year. In 2024, prepaid was a drag of about 80 basis points.
It will be accretive from a revenue standpoint in 2025.
OK. Great. Last question I wanted to ask you, it relates to AI. How significant do you think artificial intelligence will be in telecom services? What are the ways you'll leverage it in consumer to drive a better customer experience and enhance your sales processes while at the same time increasing operating efficiency? It seems like telecom is one of kind of the big industries that can stand to benefit from AI.
Yes. The AI revolution did not start with ChatGPT being public. We have been at it for a number of years, at least five or six years. In my area, we have been using AI and machine learning for propensity modeling, propensity to churn, propensity to add a product, et cetera, for quite some time now. We have been using AI also in our call centers for the AI to listen to the conversation and then prompt our rep to offer a personalized offer promotion to customers, so real time during a call. It has been a continuous journey. We have been investing in those capabilities for a while. Now, if I look moving forward, we have opportunities in our network in many different places. Joe is better placed than me to comment on how and when and how much.
It's an opportunity on the B2B side as well with solutions that serve the AI ecosystem. On the consumer side, we have several opportunities. If I start with the value proposition side, we introduced our first perk that offers Gemini Pro to customers, so the Google One Premium perk for $10, $10 savings for customers. We have been pleased by the take-up rate from consumers. There is demand starting to materialize and customers ready to pay for a premium AI service. We are using it to improve the productivity of our front line, whether it's in stores or in customer service. We have introduced new tools, personal research assistant, to help our front line navigate very quickly amongst our portfolio of offers. The same tools are available also for consumers by themselves when they want to transact with us digitally to access personalized service, personalized recommendations.
AI will continue and grow in importance for us.
Mass personalization seems to be one of the.
Yes. Personalization at scale is the name of the game for us this year. Coming back to your question about churn, why is personalization important? The more we sell services to our existing customers, so adding phone lines, tablet lines, watches, perks, protection services, the more loyal they are. Personalizing the experience, adding services is a virtuous circle. It improves our path, and it reduces churn. That's why personalization is key for us.
OK. All right. We'll wrap it up there. We're out of time. Thanks, Frank. Appreciate it.
Thank you.
Thanks, everyone.