Me extend a very warm welcome to all of you on behalf of BCG and our good friends and partners, New Street Research, to our latest installment of our Connectivity Conference. I'm Max, I'm a Managing Director and Partner. I lead our European telco work as well as our global center for Telco Networks together with Michael. We have Bora here who leads a lot of our infrastructure work in North America for us. It's a very exciting day, actually, and a very exciting conference. I think it can honestly be said we have a stellar lineup of speaker and panelists, the best we've had since we started this conference quite a few years ago. Also excitingly, we're doing this this time live on both sides of the Atlantic.
We're in New York today and then we're continuing the conversation tomorrow morning at 8:00 A.M. sharp in London. You're actually all registered for that automatically for the livestream, so set your alarm for 3:00 A.M. and we'll see you there. That gives you a bit of time to prepare for the 4:00 A.M. local time start. It's a very exciting time in the industry. I think it's a great time to be having this conference. Mobile World Congress is just a few weeks past, I think what I took away from it, and I can't quite prove this, but I think it'll hold up to scrutiny, is every single booth, presenter, exhibitor, promised AI inside as the game changer for their proposition. We want to talk about that today. How much of that is promised land? How much of that is actually achievable?
How much of that is already being done? The other thing that I think became very clear at Mobile World Congress is the competitive dynamics are shifting across operators, hyperscalers and hundreds and hundreds of specialist tech players all going after value streams that are starting to increasingly converge. We want to have that as sort of the umbrella theme for our discussion today. More specifically, there are really five topics we want to touch upon over the course of the day with our various speakers and panels. Fixed Wireless Convergence—i s there more to come? What are the challenges? What are the opportunities? How do things like Fixed Wireless Access play into that? That is going to be a big one for today. Network monetization.
What are we seeing in terms of offerings, in terms of propositions, in terms of solutions that are potentially enabling operators and infrastructure players to actually monetize and recoup some of that investment that's gone into the infrastructure? We'll be talking about mobile edge cloud. We'll be talking about IoT and other solutions. Are they really scalable? Are they going to bring us the value that we need them to bring us to drive a sustainable sort of total shareholder return? We're going to talk about Gen AI. Of course Gen AI in the network space arguably would be a less mature space than say customer operations, but still we're starting to see activity there and how is that going to influence how we plan, how we build and in particular how we run our networks. We're also going to talk about future proof network infrastructure.
How will we get there? What does it mean actually? And how do we manage legacy decommissioning, a highly complex topic in parallel to that decommissioning DOCSIS, decommissioning copper and so on and so forth. Finally, we will talk about cloud native networks. What does that mean for the operators? What sort of plays and solutions does that open up? What is the role of the hyperscalers in helping, in supporting, and teaming with the operators? Those are the themes we want to focus on today. I'll hand over to Mickey for a couple of further thoughts.
Thank you Max and also a very warm welcome from my side. I would like to double down on three trends and share a very short reflection on what we saw on one side in Barcelona at Mobile World Congress, but also what we see across and through the industry. Max mentioned that the topic, especially next gen connectivity topic of that AI moves from an overlay to an AI inside model so that we see more and more network elements get the ability to autonomously configure themselves, that we have Data Line Management in the what we see is, and this is a great outlook that the topic of autonomous networks seem to slowly taking up speed again in that we have then the topic of building for tomorrow. This is all about balancing hype and execution.
I mean one tagline out there is the topic of O-RAN where we see, okay, there was once a very bold promise. We see that some of the vendors, especially the alternative vendors, they went a bit more silent. We see now that the traditional and incumbent vendors are really taking that up and there are various models in the market on how to push that through. We expect there to be first now really large scale rollouts which will also drive a bit innovation forward. Last but not least, a topic very close to my heart, the topic of cloud nativeness. We'll talk a lot about this today as well where we see, okay, slowly scaling up, right? We still see core cloud networks is still at the beginning. We see now more and more announcements where they go.
That's something we'll talk a bit about today. Where we see there are a couple of approaches. There is a full stack approach and there is more the function by function approach. We'll discuss that also a bit today. Where we see there is, I would say a good momentum and I think a great push also from the hyperscalers in the market. To summarize, it's a great time to be in the market to discuss that. It's a bit of the mix between steady tech evolution. I would stay still cautious investments in newer technologies. I think one topic Max mentioned that as well is of course there's always the lookout for what is the new and what are the new and more scalable business models for additional revenues. Let me hand over here to Bora to kick us off for the day.
Yes, sounds good. Thanks again everyone. On behalf of our European team and our North America team, we're really excited for today. Echoing, it's really one of our most fantastic lineups we've had across the board. We will have marquee operators obviously kicking off today. We've also got marquee investors, megafunds, along with the cloud community that will be in attendance today to drive kind of cross functional insights for all of you. We expect to make today very engaging. Hopefully the discussion and the insights are novel to you and we're really looking forward to today. Quick housekeeping, if you need anything, please feel free to come to the front desk. Ask any questions. They're here to help navigate the day. We also have conference rooms on the floor should you need to take calls today as well.
Yeah, to get the day started we'll have Frank Boulben, Chief Revenue Officer of Verizon Consumer, and we'll get the live stream set up and we'll get rocking today. Thanks so much.
I think because of the live stream, in case you're wondering, we are on the clock and we have to be on the dot. I think there's a two or three minute gap now until we get going. Don't go get a coffee, otherwise we'll run late. Just give us two minutes.
Can you guys hear us?
Yeah.
Do we have to start at 8:30 exactly for the live stream?
Great. Let's get started guys. I'm delighted to introduce our first speaker of the day, Frank Boulben. Frank's no stranger to the New Street- BCG events. We love having him here. We're very lucky to have him here today because he's sitting sort of right at the center of the biggest controversy impacting the mobile sector in the U.S., which is what's going on with mobile growth in the first quarter. We're going to delve into that. We love having Frank at these events because he's the Chief Revenue Officer for the Consumer business at Verizon now, but he's been the Chief Strategy Officer, he's been a CTO, he's held roles at Verizon for a number of years, but also in Europe at operators and equipment manufacturers.
He has really unparalleled insights into the sector, and he can speak about those insights in an unusually eloquent way for a telecom executive. Frank, thanks for being here. To kick things off, I'd love to get your perspectives on what's going on with mobile growth in the first quarter. It looks like all three of the big carriers have had a difficult January, which suggests to us that the market overall might be growing at a slower rate than expected. I think you've characterized the weaker than expected trends in Verizon the first quarter as more of a competition than a market issue. I'd love to kick off there.
First of all, good morning, Jonathan. Good to be back here. Before we get started, I'll ask you in the room and on the webcast to refer to our investor website for our safe harbor. Having said that, first, let's put the growth of the Consumer postpaid market in perspective. Over the last four years, the industry Consumer and B2B has added about 9 million net adds per year, 80% Consumer, 20% B2B. For 2025, we expect that number to go slightly down to the tune of 5% or 10%. So 8 million-8.5 million net adds, that still makes for very healthy industry growth. Now, if I zoom on Q1, which is your question, what's unusual in Q1? I think there are two factors, one external for us and one Verizon- specific.
The external factor is it has been an unusual quarter from a competitive intensity standpoint. I don't think it started at the end of January or because of a weak January. What we observed is at the very beginning of January when we dropped out of our holiday promotions like we do every year for the first time. Certainly since I've been with Verizon, our competitors didn't follow. They've been more aggressive since the very beginning of the quarter. We've seen that throughout the quarter with buyout promotions that have been particularly aggressive. That's the external factor. We've seen a lot of switching activity as a result. The internal factor is we've done our price ups in January.
Our price ups combined with those we did in the latter half of 2024 this year are going to generate, net of any churn, an incremental revenue of more than $1 billion. I'll do that trade- off any day. It created elevated churn for us in Q1. That's how I would characterize Q1.
Frank, don't you think the unusually tough promotions from T-Mobile and AT&T are a response to a tough market environment, that they're fighting harder to at what they're looking to get out of a shrinking pool?
I cannot speak on their behalf. As far as we are concerned, Q1 is always a slower market seasonally for us and we adjust our promotions to the demand. Typically January, February, less demand, March, more demand. You see us changing our promotional portfolio. We haven't seen a significant change year-on-year. From a Verizon standpoint, I cannot speak for them.
Got it. I'm sort of wondering whether that's the driver. Just because I felt like in 2024 we had a fairly rational competitive environment. This market is always competitive. It seemed like the three national carriers were behaving in a sort of a competitive fashion that would lead to good returns for the industry. ARPU is growing, margins expanding, and it seems like there's been a bit of a shift in competitive intensity at the beginning of the year.
Look, last year we returned to Phone net add positive. We grew Wireless Service revenue at 3.2%. This year our goal is a repeat. We want Phone net adds to be better year-on-year. We've guided for wireless service revenue growth 2%-2.8%. We are going to continue with the same formula for this year.
Yeah. The Wireless revenue growth is very much in your control because you've got a lot of influence through what you do with pricing in ARPU. On the subscriber front, though, given that we're starting off with net adds for the first quarter that are likely worse than last year, what gives you confidence that net adds for the full year are going to be better? What's going to change over the course of the next three quarters?
The number one driver is going to be churn reduction for us. We've been investing in improving our customer experience. We've been investing in our capability to drive mass personalization in the treatment of our base with next best offer, next best service to improve retention. We've got also an increase in our joint customer base. Maybe we'll come back to that. Customers who have mobile and broadband with us are churning less. We see also customers taking more services from us churning less. Lastly, as we continue to expand our C-Band coverage, we see less churn where we offer a C-Band experience. That's the churn reduction driver. The other driver is continuing our gross add momentums. We've had two consecutive years of phone growth year-on-year, 2023 and 2024. We intend to continue this year.
That is on the back of a successful value proposition. myPlan that is resonating with customers. With myPlan , we've reduced the price premium versus our two main competitors. We offer something that is really unique with the perks that they cannot get anywhere else. We offer those perks at the entry level as well. If you are a customer seeking an entry price plan in postpaid wireless at Verizon, you can still get significant savings on streaming offers. For instance, if you take the top five most popular streaming services, you're going to save $20 per month. If you look at it from a household expense standpoint, it makes our entry price point very competitive.
By the way, you should know that myPlan has been pretty transformative to Verizon's operating trends in 2024. It was Frank's invention. He's behind the myPlan initiative as well as all of the partnerships that Verizon signed up over the course of the last four or five years that feed into myPlan .
Thank you. It takes a village. We have a large team at Verizon, but you're right, it has been the most successful price plan we've launched in a number of years. I give you a couple of proof points. We have already more than half of our customer base is on myPlan . That's the fastest migration I've ever seen. We sold last year, we said by October we had already sold 7 million perks at $10 on average per perk, by the end of this year, we are confident we'll exceed 14 million. It is becoming a business in itself and it generates good margins as well.
Frank, going back to the two drivers of improving subscriber trends over the course of the next three quarters, the churn reduction you've spoken to on gross adds improving year- over- year, will they improve in the first quarter?
No. We said first quarter was soft for u s.
On gross adds specifically.
On gross ad, yeah.
What drives the acceleration in gross adds for the rest of the year?
It's not unusual for us to start with a slow Q1 on gross adds. As I said, myPlan is resonating. myPlan is a platform and it allows us, unlike our competitors, every quarter to innovate with the perks we offer. We just recently introduced YouTube Premium as a perk. We just introduced Google One as a perk as well. First service with a subscription for Gemini for AI that is resonating well. Stay tuned. You're going to see in the coming months more innovation, more innovation coming on myPlan .
Touch on the trade offs between driving that recovery in growth and subscriber trends. And EBITDA, you've guided to, I think, 3% EBITDA growth for the year as well. Is that at risk as you sort of reinvest in lower churn and higher gross adds?
We've guided to 2-3.5%. 3% is slightly above the midpoint, but yes. We want to have first balanced revenue growth between the P and the Q. It's important for us to return to phone gross add positive year-on-year, and that will be on the back of the churn reduction and continuing momentum with myPlan on the on gross adds. Then there is the P. On the P, you have several components. We have the price ups we did at the beginning of the year. We have the premium mix in our base, 45% of the base is on a premium plan. We have a super premium plan, which is Ultimate, our best offer, and we see migration from premium to super premium as well. Excuse me for my coughing.
We have still a lot of runway on stepping up the base from entry to premium, from premium to super premium. That is one lever. The second lever is the perks as we've just discussed and other adjacencies. One best kept secret is if you look at our Wireless Service revenue, 15% is coming from non- connectivity services and that's growing double digit. That is the perks and other adjacencies we offer to our customers. Third, we continue and sell other connected devices to our customers, watches, tablets, and lastly cross selling broadband. All of those things are going to contribute to the top line growth. The Prepaid business in the second half of the year will return to revenue accretion as well. Last year it was a drag of 80 basis points so that is on the top line.
On the bottom line, we continue and have a disciplined approach to promotion and optimizing the yield on acquisition and retention, even if it's a more competitive environment. We are continuously focused on taking costs out of the business from network to G&A.
I want to come back to ARPA growth in a second, but before I do, just going back to the 8 million-8.5 million subscriber adds that you expect for the industry this year. We learned at the end of last year that immigration was driving almost all of the population growth in the U.S. and that immigration had been running at three times the normal rate. It seems clear that it's going to come down starting this year over the course of the next four years. How does that impact mobile subscriber growth for the industry? Given that sort of backdrop, give us some more insights into your confidence in 8 million-8.5 million .
We see very limited impact from any change in immigration o n the postpaid side. Y eah, there is a little bit of immigration influx on the postpaid side, your H-1B visa holder, et cetera. We do not see that changing meaningfully. On the prepaid side, there might be some impact at the low end of prepaid. Having said that, we saw immigration decelerating in the second half of last year and we still had a very strong Q4 in our Prepaid business. We do not see that happening in Q1 on prepaid from a Verizon standpoint.
On prepaid, you're going back to growth this year. Does that mean subscriber growth specifically?
Subscriber growth for the year and revenue growth for the second half of the year.
Got it. Subscriber growth with or without SafeLink?
Without SafeLink, SafeLink continues to be focused on low income families that can qualify for the Lifeline program.
SafeLink, does it start to stabilize this year now that ACP is behind us?
Yes. Most of the losses on SafeLink last year were ACP- driven. This year SafeLink is primarily focused on the Lifeline program and so much smaller volumes than in the previous years.
Got it. Moving to ARPU or ARPA, it's clearly a critical driver of revenue and EBITDA growth. For Verizon, it's been growing at what I think of as sort of an above inflation rate. Is there a limit to where ARPA or ARPU can go in the context of sort of household spending or some other metric?
First, what we see is an inverse correlation between ARPA and churn. The more customers are spending with us, the more loyal they are and the less they churn, which is maybe counterintuitive, but if you have multiple phone lines with us, tablets, watches, broadband, other services, you tend to churn less. On our credit card, or soon our high yield savings account, we see the customers churning less if they have more products with us. The second point, which indicates that there is not a ceiling as one might think, is we sell adjacencies that customers are paying for to third parties in other sectors and we offer a saving to customer. Streaming services is a very good example. Customers on average in the U.S. have five streaming services. If they buy them from Verizon, they are going to save on the expenditure of the household.
I see a lot of potential in those adjacent services. They are growing at double-digit rate. It's already 15% of the mix, so that will continue. Obviously the broadband penetration in our mobile base is going to continue as well. Today we have only 16% of our mobile accounts that have broadband with us, FWA or Fios. That number will grow significantly in the coming years.
Got it. The growth that comes from adding additional services to existing accounts, I totally get it. I guess it would be a mistake to look at sort of telecom revenues as a percentage of household disposable income. We've got to look at the full bundle of what households spend in content and broadband because you're providing savings there. What about the sort of the relationship between wireless pricing and churn? I think the key source of differentiation for Verizon has been network reliability. Your pricing is above where T-Mobile's is just on the mobile piece of the product. Is your network better enough to support that pricing gap? Can the gap continue to expand? Do you need them to grow pricing in order for you to grow pricing?
First, the network is better. We cover 500,000 more sq mi in the U.S. We have not completed the deployment of our C-Band spectrum. Yes, we'll continue and have that network advantage. As I said earlier, we've reduced the price premium with introduction of myPlan . That got unnoticed. What we did with myPlan , we got rid of inclusions. Customers do not want to pay for things they don't need. What we did, we separated connectivity from any other inclusions. Now with myPlan , you have a simple choice for your connectivity. Good, better, best from a pure network experience standpoint. Whatever the option you choose, you have perks on which you can save. That new structure is accretive from an ARPA standpoint, as we discussed, but it also reduced the price premium, which is now below 10%.
I think it's absolutely sustainable.
Got it. Frank, I think you've lost your earpiece. We should put it on for the guys that are on the webcast. Shifting gears a little bit to C-Band and what that enables in terms of fixed wireless access, which is an important revenue driver for you as well. Can you give us a sense of how many households can get fixed wireless access over C-Band today and how quickly that's changing?
Yes. Today we cover 60 million households and business locations with fixed wireless access. We've indicated at our Broadband Investor Day that that will get to 90 million in the coming years. We have very strong momentum on broadband. We offer, as you know, both fiber in the Fios footprint and FWA elsewhere. Last year on the Consumer side, we added more than 1 million households in terms of subscriber number. We've got very strong momentum there. It's continuing in Q1 on the Consumer side.
That is really interesting. I thought that Hans said he expected fixed wireless access adds to slow a little bit in the first half of the year until your MDU product came into effect later in the year. You basically have not seen that slowdown in 1 Q.
What we've said, I was commenting on Consumer alone and what we've guided is that Consumer plus Business, all technologies, every quarter will be between $350 million and $400 million. You might see variability. Q1 is always softer as well, but we expect on average for the year to stay in that range.
Got it. Give us a little bit more context on the MDU product. What's the addressable market for that ultimately, and how quickly can you open up that addressable market?
We haven't communicated an explicit addressable market, but things in millions of units that will come later in the year. We are testing. We want to launch it when it's absolutely right in terms of customer experience. It's another use case for millimeter wave spectrum because the technology leverages the millimeter wave spectrum from the rooftop of the donor site to the MDUs we want to serve.
One of the most fascinating things that came out of the broadband update that you guys gave last year for me was that you're starting to sell fixed wireless access markets where you also have fiber. Does that suggest that there's market segmentation? There's a portion of the market that is interested in the fixed wireless product and a separate portion of the market that's interested in fiber.
No, I think that's very much how as industry insiders we look at it. It's not the way we market and it's not the way consumers understand it. We made the change three or four years ago to market all of our broadband services under the Verizon brand and with a name which is Verizon Home Internet. If you look at our advertising, it's about Verizon Home Internet. You go to our website, you qualify your address, and depending on your address, you will have a fiber offering or an FWA offering. The offer we've constructed is also similar to myPlan . It's called my Home and same thing. Good, better, best in terms of the network experience. You pick your perks with complete price transparency. We see that resonating very well.
Customers tend to choose the premium plans whether it's on the fiber side or on the FWA side. In both cases, we win against the cable companies. I expect for the foreseeable future fiber and FWA to continue and take more than 100% of the net adds of the broadband industry. We've been taking share from the cable companies in the Fios footprint with fiber for the last number of years. With FWA, more than half of our gross adds are coming from cable companies. It's a two-pronged approach that we're going to continue and it's working well.
Where are the other half of the fixed wireless access net adds coming from? Is that market expansion?
You have a fraction coming from fiber. You have a fraction coming from DSL as well.
Yeah, got it. That is a really important insight. Although technically fixed wireless access is offered in markets where you've got fiber based on how you manage the sales channel. If fiber is available in that market, that's what the customer is going to see. Got it. Okay, give us some more insights into the strategic imperative behind the Frontier acquisition. Was this driven by the fact that fiber is just a good asset that generates good returns? Is it that you get the bundling and market share benefits or is there a network driven imperative behind it?
The first strategic objective is to grow our market share in the broadband market. We see an opportunity there. We already have two technologies, FW and fiber. We saw with Frontier the opportunity to accelerate our growth in terms of market share with fiber. That is the number one reason. It also allows us to do cross marketing between mobile and fiber in that footprint and it allows us to generate significant cost synergies. We've indicated a run rate of $500 million per year after three years and we've acquired the asset at a fair price that is accretive for our shareholders. If I believe your analysis.
nominal price. Got it. The bit sort of drilling in a little bit deeper, the strategic imperative behind the benefits that you, that you just listed. Is it the case that you're going to need a fiber broadband asset to compete effectively in mobile in the future?
With the acquisition of Frontier, we will be by the end of 2026, close to 30 million. We said that post closing we will invest in at least 1 million, so 1 million plus new open for sale fiber households every year and we've indicated our goal to be at 35 million-40 million within a few years. If you combine that with the 90 million footprint on FWA, we will be able to serve the vast majority of US households with a Verizon Home Internet product. We are in a very good position. If there are additional opportunities, we'll screen them and assess them.
Yeah, what I'm wondering is you'll be able to offer a broadband product to most, the vast majority of households in the US with one of these products or the other. I'm wondering if fiber in particular gives you an advantage that fixed wireless doesn't. On the network side, I'm sort of thinking forward to a future where we've burned through all of the spectrum below 6 GHz and we need to densify networks significantly, like by orders of magnitude, in order to meet demand. That fiber at that point becomes a really critical strategic asset. The more you have, the better your margins are.
That's a very long term issue you're referring to. We've just indicated that we can double the capacity on the FWA side. So for 4 to 5 million subscribers to 8, 9 million subscribers, we've got the MDU solution that is coming soon as well. I think for the foreseeable future, foreseeable meaning till the end of the decade at least, we're going to continue with that two pronged approach between fiber and FWA. Obviously where we have fiber, we don't need to use any mobile capacity for FWA. It will over time drive where we invest in the mobile network.
In terms of that million a year that you mentioned that you're going to deploy at after the close of the deal, why isn't that faster? When I look at your peers they're sort of deploying at two to three times that pace.
We've said one million plus. I will stick to that for now.
Got it. Would it make. One of the advantages that AT&T and T-Mobile have sort of structured for themselves is they're doing a lot of the investment off balance sheet through JVs, which allows them to continue buying back shares and accelerating dividends. Does that sort of a structure make sense for you, Frank?
It really depends on the specifics. We assess all opportunities and all structures that are presented to us. The guiding principle is, does it make sense in terms of acceleration of our broadband penetration? Does it make sense operationally and is there a path to long term owner economics, whatever the structure? If we find an opportunity that fits those criteria, we might pursue it.
We saw a story on Bloomberg yesterday on AT&T potentially buying Lumen's fiber assets. I presume if there's a transaction that you guys would have looked at those assets, can you comment at all on why those were or weren't attractive to you?
Thanks for asking, but you know, I cannot comment on any speculation.
Fair enough. We had to try. Can you give us a perspective on what you think the sort of the end state for the market looks like in terms of three national carriers and how much fiber will be sitting underneath those three mobile assets in sort of five plus years from now?
It's difficult to speculate on that. What I think we can say with a degree of certainty is that fiber penetration will continue to grow substantially in the coming years. Probably not as high as the cable penetration is today, but substantially higher. The bulk of it will be the top two players of today, so us and AT&T. What will happen beyond that is speculation. What also is important to note is that the cable companies play also in that convergence game, but it benefits us as their wholesale provider.
Yeah, Frank, we're out of time. I do want to pick your brain very quickly on direct to device. Why is AST the right partner for you? How big is this sort of opportunity for Verizon? How do you think about the offers that T-Mobile's put on the table for your customers in terms of like a $20 price point?
Maybe they have a stronger need for coverage. As I said, there is 500,000 sq mi they do not cover. We believe that it's important for customers to have absolute peace of mind in case they need emergency service. Emergency SMS everywhere in the country, from a landmass standpoint, that's critical and we are offering it today. With Globalstar on Apple and with Skylo on Android, we're going to have a richer solution thanks to our partnership with AST, leveraging our unused 850 MHz spectrum, coming towards the end of the year, beginning of next year with voice and some data services, we think that there is a niche of customers that is ready to pay for that service. The pricing I've seen in market seems a bit too rich to me.
Great. Frank, we really appreciate you being here today and sharing your insights with us. Thank you very much.
Thank you.
That's great.